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T
his
is
Wärtsilä
/
Sustainability
/
Governance
/
F
inancial
review
BOARD
OF
DIRECTORS'
REPORT
BUSINESS
MODEL
Wärtsilä
provides
the
marine
and
energy
markets
with
smart
technologies
and
optimised
lifecycle
services.
In
the
energy
industry,
Wärtsilä
offers
flexible
power
plants
as
well
as
energy
management
and
storage
systems
on
an
equipment
only
or
turnkey
delivery
basis.
The
marine
offering
includes
power
systems,
voyage
solutions,
as
well
as
exhaust
treatment
applications,
gas
solutions,
and
shaft
line
solutions.
Wärtsilä
has
the
capabilities
needed
to
combine
its
marine
products
into
larger
integrated
systems
and
solutions.
Wärtsilä’s
portfolio
of
services
ranges
from
spare
parts
and
technical
expertise,
to
lifecycle
solutions
ensuring
a
maximised
installation
lifetime,
increased
efficiency,
and
guaranteed
performance.
The
company
aims
at
maximising
environmental
and
economic
performance
by
emphasising
sustainable,
data
-driven
innovation
and
total
efficiency.
To
support
its
geographically
dispersed
customer
base,
Wärtsilä’s
sales
and
service
network
covers
258
locations
in
73
countries
around
the
world.
Wärtsilä
operates
primarily
through
its
subsidiaries
and
strategic
joint
ventures.
The
company’s
manufacturing
model
is
assembly
based,
thus
emphasising
the
importance
of
developing
long
-term
relationships
with
its
global
network
of
suppliers,
which
consists
of
appr
oximately
1,200
global
direct
suppliers.
Wärtsilä’s
personnel
is
made
up
of
approximately
18,000
employees
comprising
139
nationalities.
By
recruiting
and
retaining
the
best
talent,
Wärtsilä
is
able
to
be
the
most
valued
business
partner
to
its
customers,
and
the
employer
of
choice
for
current
and
future
employees.
Wärtsilä
is
committed
to
conducting
its
business
in
a
responsible
manner,
and
promotes
responsible
practices
throughout
its
value
chain.
CEO
APPOINTMENT
In
September,
Håkan
Agnevall
(b.
1966,
M.Sc.
(Tech),
MBA)
was
appointed
as
the
new
President
and
CEO
for
Wärtsilä
Corporation.
Mr
Agnevall
assumed
the
role
on
1
February
2021.
He
succeeds
Jaakko
Eskola,
who
will
continue
as
a
senior
advisor
to
the
Board
and
executive
team
until
he
retires
on
30
June
2021.
Mr
Agnevall
has
a
proven
record
of
developing
organisations
and
businesses
with
a
strong
focus
on
customers,
technology,
and
people.
His
experience
in
pioneering
electrification
and
autonomous
transportation
will
strengthen
Wärtsilä’s
activities
in
corresponding
areas.
STRATEGY
Strategy
implementation
in
2020
Despite
the
COVID
-19
related
disruptions
to
business
operations,
Wärtsilä’s
commitment
to
R&D
activities
has
remained
unchanged.
The
year
saw
progress
in
future-
proofing
engine
technology
in
line
with
the
global
trend
towards
the
decarbonisation
of
the
energy
and
marine
markets
.
This
was
demonstrated
by
the
initiation
of
full
-scale
testing
of
ammonia
as
a
fuel
in
Wärtsilä’s
four
-stroke
combustion
engine
,
as
well
as
with
the
announcement
of
efforts
to
develop
the
combustion
process
in
gas
engines
to
enabl
e
them
over
time
to
burn
100%
hydrogen
fuel.
Several
new
concepts
utilising
connectivity
and
digitalisation
to
enhance
efficiency,
sustainability
,
and
the
safety
of
customer
operations
were
also
introduced.
These
included
solutions
for
smart
navigation,
remote
support
services,
as
well
as
a
cloud
simulation
platform
enabling
remote
training.
For
the
energy
ma
rkets
,
Wärtsilä
launched
the
Energy
Transition
Lab,
an
open
-data
p
latform
for
the
energy
industry
to
understand
the
impact
of
greater
utilisation
of
renewable
energy
and
the
effects
of
COVID
-19,
and
help
accelerate
the
energy
transition
.
Wärtsilä’s
emphasis
on
developing
solutions
utilising
the
latest
technology,
in
line
with
its
Smart
Marine
and
Smart
Energy
strategies,
resulted
a
number
of
important
orders
during
the
year.
In
the
marine
markets,
Wärtsilä
received
several
orders
for
hybrid
solutions,
including
a
contract
to
supply
a
fully
integrated
Wärtsilä
hybrid
solution
for
Misje
Rederi’s
three
newbuild
eco
-friendly
5,000
DWT
bulk
carriers.
Moreover,
the
order
from
UltraShip
Denmark
to
install
the
cloud
-based
Wärtsilä
Fleet
Operations
Solution
(
FOS
)
across
their
entire
fleet
demonstrates
market
development
towards
dig
ital
solutions
to
improve
efficiency
and
lessen
environmental
impact.
In
the
energy
sector,
the
need
for
flexible
power
solutions
to
support
the
expansion
of
renewable
energy
and
secure
grid
reliability
was
illustrated
by
the
resilience
of
activity
in
the
energy
storage
markets.
Awarded
contracts
included
the
first
order
for
the
GridSolv
Quantum
energy
storage
system,
a
fully
integrated
modular
and
compact
solution
that
enables
the
rapid
deployment
of
cost
-effective
energy
storage.
Another
order
reflecting
the
benefits
of
flexibility
was
the
contract
received
in
Europe
to
deliver
four
natural
gas
driven
power
plants
with
a
combined
output
of
nearly
300
MW.
The
new
fast
-starting
plants
will
provide
flexible
system
balancing
as
more
renewable
power
is
incorpor
ated
into
the
power
system.
Collaboration
with
industry
stakeholders
is
an
essential
element
in
the
development
of
technologies
needed
to
meet
changing
market
requirements
.
Joint
efforts
includ
ed
agreements
aimed
at
accelerating
the
marine
industry’s
ongoing
digital
transformation,
developing
autonomous
shipping,
and
exploring
the
use
of
new
technologies
and
alternative
fuels
to
promote
decarbonisation
efforts.
T
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/
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While
the
health
and
safety
of
personnel
is
a
continuous
priority
for
Wärtsilä,
it
reached
a
new
level
of
importance
in
2020
with
the
onset
of
the
global
C
OVID
-19
pandemic.
Wärtsilä
maintains
a
diverse
global
workforce
with
thousands
of
employees
perform
ing
tasks
onsite,
either
in
the
field
or
at
customer
premises.
By
establishing
a
global
crisis
response
team
and
local
country
incident
management
teams,
it
was
possible
to
monitor
and
act
upon
the
rapidly
developing
situation.
Global
mobility
was
secured
whilst
observing
appropriate
safety
and
precautionary
measures.
Numerous
Wärtsilä
employees
resorted
to
performing
their
work
remotely.
In
order
to
accommodate
this
way
of
working,
and
to
ensure
that
the
change
of
routine
functioned
smoothly,
Wärtsilä
provided
employees
with
digital
collaboration
tools
and
methods.
Furthermore,
guidelines
and
devices
were
provided
to
secure
an
appropriate
working
environment
at
their
homes.
Zero
lost
-time
injuries
continues
to
be
the
company’s
global
target.
During
2020,
lost
-time
injury
frequency
was
2.03
(2.25),
which
represents
a
decrease
of
1
0
%
compared
to
the
previous
year.
Financial
targets
and
outcome
in
2020
Wärtsilä’s
long
-term
financial
target
is
to
grow
faster
than
global
GDP,
and
to
maintain
its
operating
profit
margin
between
14%
at
the
peak
of
the
cycle
and
10%
at
the
trough.
Furthermore,
the
target
is
to
maintain
gearing
below
0.50,
and
to
pay
a
dividend
of
at
least
50%
of
earnings
per
share
over
the
cycle.
Wärtsilä’s
financial
performance
in
2020
was
below
the
long-
term
target,
as
a
result
of
the
effects
of
the
COVID
-19
pandemic
on
the
company’s
demand
environment
and
business
operations.
Net
sales
for
2020
declined
by
11%,
bringing
Wärtsilä’s
five
-year
compound
annual
growth
rate
to
-2%.
The
five
-year
compound
annual
growth
rate
of
the
global
GDP
was
2.3
%
(source:
IMF
estimate
as
of
October
202
0
).
Wärtsilä’s
comparable
operating
result
amounted
to
EUR
275
million,
which
represents
6.0%
of
net
sales.
Gearing
decreased
to
0.18.
The
Board
of
Directors'
proposed
dividend
of
EUR
0.20
per
share
represents
88.2%
of
operational
earnings.
THE
YEAR
2020
Operating
environment
Marine
The
effects
of
the
COVID
-19
pandemic
significantly
affected
the
demand
for
equipment
and
services
in
the
shipping
and
shipbuilding
markets
throughout
2020.
The
decline
in
seaborne
trade
and
travel
restrictions
impacted
the
fleet
utili
s
ation
rate,
especially
in
the
passenger
sector,
and
limited
the
appetite
for
newbuild
investments.
As
a
result,
only
815
vessels
were
contracted
during
the
year
(1,153
in
2019,
excluding
late
contracting)
and
the
demand
for
spare
parts
and
maintenance
activities
softened.
The
news
released
in
Novembe
r
regarding
COVID
-19
vaccine
results
improved
confidence
in
a
recovery
in
both
newbuild
and
service
activit
ies
across
all
vessel
segments.
Cruise
operations
were
heavily
affected
by
the
travel
restrictions
and
no
-sail
orders.
Despite
a
marginal
uptick
in
cruise
activity
towards
the
end
of
the
year,
the
vast
majority
of
the
fleet
remains
idled.
After
the
initial
disruptions
following
the
first
virus
outbreak,
the
ferry
fleet
was
gradually
reactivated
over
the
summer,
but
was
increasingly
idled
again
in
the
fourth
quarter
as
,
on
top
of
the
typical
seasonal
unwinding
,
a
new
wave
of
COVID
-19
hit
the
European
markets.
The
offshore
sector
continued
to
be
under
severe
pressure
due
to
low
oil
demand.
Limited
exploration
activity
led
to
a
decline
in
utilisation
of
drilling
rigs
and
support
vessels
to
levels
similar
to
the
post
-2014
market
cycle.
Conversely,
the
expected
growth
in
offshore
wind
projects
generated
demand
for
speciali
sed
vessels,
providing
newbuild
and
service
opportunities
in
wind
farm
related
vessels.
In
the
LNG
shipping
sector,
a
positive
trend
in
spot
rates
began
in
the
third
quarter
as
a
result
of
the
rapid
increase
in
Asian
LNG
demand
.
This
was
due
to
seasonal
factors
as
well
as
constrained
supply
resulting
from
outages
at
several
liquefaction
terminals.
The
containership
market
recovered
rapidly
from
the
initial
shock
posed
by
COVID
-19.
This
recovery
was
supported
by
continuous
gains
in
freight
volumes
resulting
in
higher
freight
rates
and
less
idle
capacity.
Crude
oil
and
product
tanker
earnings
remained
under
significant
pressure
during
the
latter
part
of
the
year,
as
oil
supply
cuts
and
the
unwinding
of
floating
storage
lowered
the
demand
for
oil.
Although
earnings
for
bulk
carriers
increased
in
the
second
half
,
thanks
to
a
higher
demand
for
iron
ore
from
China,
the
number
of
idled
vessels
continues
to
be
above
normal
levels.
The
HSFO/VLSFO
price
differential
narrowed
significantly
as
a
result
of
both
the
sharp
decline
in
oil
prices
and
improved
VLSFO
availability,
thus
negatively
impacting
the
pace
of
scrubber
retrofits
and
installations
on
newbuilds.
After
the
positive
news
regarding
COVID
-19
vaccine
breakthroughs
in
November,
oil
prices
surged
and,
consequently,
the
price
spread
between
bunker
fuel
types
increased
to
around
80
USD
per
tonne.
Nevertheless,
the
market
for
scrubber
Target
Development
in
2020
Development
in
2019
Net
sales
growth
faster
than
global
GDP
-11%
0%
Comparable
operating
result
margin
between
10%
and
14%
6.0%
8.8%
Gearing
below
0.50
0.18
0.30
Dividend
payment
at
least
50%
of
earnings
per
share
over
the
cycle
88.2%*
130.8%
*Proposal
of
the
Board
of
Directors
T
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is
Wärtsilä
/
Sustainability
/
Governance
/
F
inancial
review
contracting
is
still
characteri
sed
by
a
high
degree
of
uncertainty
,
mostly
due
to
the
limited
visibility
on
future
price
spreads.
While
the
pandemic
has
led
to
a
significant
contraction
in
trade
volumes,
it
has
also
accelerated
the
digital
transformation
through
new
technologies
and
digital
applications
being
adopted
as
a
matter
of
necessity.
The
use
of
cloud
-based
remote
solutions
h
as
also
accelerated
in
response
to
restrictions
on
physical
travel.
Ship
-to
-port
communications,
as
well
as
document
and
data
exchange
,
are
increasingly
being
handled
electronically
rather
than
via
personal
interaction,
both
on
ships
and
in
port.
Furthermore,
fleet
optimisation
and
performance
management
technologies
are
increasingly
being
accepted
as
central
in
order
to
secure
profitability
in
a
competitive
market.
Meanwhile,
the
path
towards
the
decarbonisation
of
the
shipping
industry
continued
to
gain
p
ace.
The
share
of
alternative
-fuel
capable
vessels
among
the
total
newbuild
contracting
increased
during
the
year.
LNG
has
cemented
its
position
as
the
most
widely
adopted
alternative
fuel,
as
it
enables
immediate
GHG
emission
reductions.
Moreover,
the
dua
l-fuel
engine
technology
used
to
burn
LNG
is
fuel
flexible,
thus
mitigating
business
risks
associated
with
future
fuel
related
uncertainties
.
Zero
-carbon
fuels
,
such
as
biofuels,
ammonia
and
hydrogen
,
are
also
gaining
interest
as
are
various
energy
saving
technologies.
The
IMO
released
a
plan
in
November
to
drive
the
shipping
industry
towards
its
ambitious
decarbonisation
targets,
with
a
set
of
policies
coming
into
force
from
2022
onwards.
At
the
same
time,
the
European
Parliament
approved
a
proposal
to
include
shipping
in
its
emissions
trading
scheme
(ETS).
With
new
rules
expected
in
the
coming
years
that
will
require
shipowners
to
reduce
their
emissions
through
technical
or
operational
measures,
there
is
a
growing
consensus
that
vessels
should
increasingly
adopt
interoperable
network
technology
to
link
onboard
machinery,
navigation,
cargo
handling
,
and
other
systems
.
Such
technology
will
reduce
fuel
consumption,
while
representing
an
important
step
towards
decarbonisation
and
increased
efficiency.
Energy
The
COVID
-19
pandemic
and
the
resulting
slowdown
of
economic
activity
had
a
negative
impact
on
the
global
liquid
and
gas
fuelled
power
plant
markets
throughout
2020.
While
the
market
situation
has
stabilised
and
is
showing
some
improvement,
the
prevailing
uncertainty
regarding
the
duration,
development
,
and
economic
impacts
of
the
pandemic
continues
to
result
in
customers
postpon
ing
investments
in
new
power
plant
capacity.
Additionally,
energy
policies
are
being
developed
to
drive
ambitious
decarboni
s
ation
ta
rgets
,
and
utilities
continue
to
update
their
investment
strategies,
which
is
causing
uncertainty
and
delays
in
decision
-
making.
However,
activity
in
energy
storage
was
at
a
good
level,
driven
by
the
increasing
need
for
short
-term
flexible
capacity
in
power
systems
with
a
high
share
of
renewables.
While
mobility
restrictions
affected
the
ability
to
perform
service
activities,
the
demand
for
services
held
up
reasonably
well
,
and
customers
continued
to
show
interest
in
long
-term
service
agreements.
Wärtsilä’s
market
share
in
the
up
to
500
MW
market
segment
was
stable
at
9%
(9),
while
global
orders
for
natural
gas
and
liquid
power
plants
increased
by
3%
to
16.6
GW
during
the
twelve
-month
period
ending
in
September
2020
(16.0
GW
at
the
end
of
June).
Global
orders
include
gas
turbine
and
Wärtsilä
orders
with
prime
movers
over
5
MW
in
size.
The
data
is
gathered
from
the
McCoy
Power
Report.
Order
intake
and
order
book
Wärtsilä’s
o
rder
intake
in
2020
decreased
by
18%
to
EUR
4,359
million
(5,327)
compared
to
the
previous
year
.
Uncertainty
related
to
the
COVID
-19
pandemic
and
its
long-
term
implications
weakened
demand
across
all
businesses.
Book
-to
-bill
was
0.95
(1.03).
Service
order
intake
decreased
by
16%
to
EUR
2,267
million
(2,683),
while
equipment
order
intake
decreased
by
21%
to
EUR
2,091
million
(2,644).
The
order
book
at
the
end
of
the
year
decreased
by
14%
to
EUR
5,057
million
(5,878).
Cancellations
during
the
year
were
largely
in
line
with
normal
low
levels.
Wärtsilä
has
implemented
stricter
requirements
for
the
inclusion
of
new
and
existing
projects
in
the
order
book.
This
resulted
in
orders
amounting
to
approximately
EUR
340
million
being
removed
from
the
order
book
during
the
year,
primarily
due
to
lack
of
progress
or
milestone
payments
not
being
received,
as
well
as
some
cancellations.
Wärtsilä’s
current
order
book
for
2021
deliveries
is
EUR
3,298
million
(
3,571
).
Net
sales
and
operating
result
Wärtsilä’s
n
et
sales
in
2020
decreased
by
11%
to
EUR
4,604
million
(5,170)
compared
to
the
previous
year.
Service
net
sales
decreased
by
10%
to
EUR
2,255
million
(2,505).
Equipment
net
sales
decreased
by
12%
to
EUR
2,349
million
(2,665).
Of
Wärtsilä’s
net
sales,
approximately
65%
was
EUR
denominated
and
20%
USD
denominated,
with
the
remainder
being
split
between
se
veral
currencies.
The
operating
result
amounted
to
EUR
234
million
(362)
or
5.1%
of
net
sales
(7.0).
The
result
was
burdened
by
a
decline
in
service
volumes,
COVID
-19
driven
cost
inflation,
and
weaker
fixed
cost
absorption.
The
comparable
operating
result
totalled
EUR
275
million
(457)
or
6.0%
of
net
sales
(8.8).
Items
affecting
comparability
comprised
costs
related
to
divestments
and
restructuring
programmes
of
EUR
41
million
(95).
The
comparable
adjusted
EBITA
amounted
to
EUR
308
million
(498)
or
6.7%
of
net
sales
(9.6).
Purchase
price
allocation
amortisation
amounted
to
EUR
33
million
(41).
Financial
items
amounted
to
EUR
-43
million
(-47).
Net
interest
totalled
EUR
-10
million
(
-
12).
Profit
before
taxes
amounted
to
EUR
191
million
(315).
Taxes
amounted
to
EUR
58
million
(97),
implying
an
effective
tax
rate
of
30.3%
(30.7).
Profit
for
the
financial
year
amounted
to
EUR
133
million
(218).
Earnings
per
share
totalled
0.23
euro
(0.37).
Return
on
investment
(ROI)
was
7.1%
(11.5),
while
return
on
equity
(ROE)
was
5.8%
(9.0).
T
his
is
Wärtsilä
/
Sustainability
/
Governance
/
F
inancial
review
0
150
300
450
600
750
2020
2021
2022
2023
2024
2025
2026
MEUR
0
50
100
150
200
250
300
21
22
23
24
25
26
27
28
29
30
31
31+
MEUR
Annual
repayments
of
long-term
loans
0,00
0,10
0,20
0,30
0,40
0,50
2016
2017
2018
2019
2020
Group
net
sales
development
Result
Megawatts
delivered
2020
2019
Change
Marine
Power
1,257
1,505
-
16%
Energy
1,172
2,072
-
43%
Wärtsilä
total
2,429
3,577
-
32%
By
joint
venture
274
432
-
37%
Deliveries
total
2,703
4,009
-
33%
*Restated
due
to
IFRS
15
*Restated
due
to
IFRS
15
Financing
and
cash
flow
Loans
Committed
revolving
credit
facilities
(end
of
period)
Wärtsilä’s
cash
flow
from
operating
activities
in
2020
increased
to
EUR
681
million
(232),
thanks
to
improved
working
capital.
Working
capital
decreased
to
EUR
257
million
at
the
end
of
the
year
(732),
driven
by
lower
inventories,
as
well
as
by
efforts
to
reduce
credit
risk
through
strengthening
the
collection
of
receivables.
Advances
received
totalled
EUR
452
million
(452).
Additionally,
EUR
38
million
of
advances
pertained
to
assets
held
for
sale.
Maturity
profiles
of
long
-
term
loans
Gearing
Wärtsilä
aims
to
ensure
sufficient
liquidity
at
all
times
through
efficient
cash
management
and
by
maintaining
the
availability
of
sufficient
committed
and
uncommitted
credit
lines.
Refinancing
risk
is
managed
by
having
a
balanced
and
sufficiently
long
loa
n
portfolio.
Wärtsilä
has
focused
on
further
strengthening
its
liquidity
reserves
during
the
year
in
response
to
the
COVID
-19
pandemic.
Measures
taken
include
the
extension
of
revolving
credit
facilities
and
the
negotiation
of
additional
loan
facilities.
T
his
is
Wärtsilä
/
Sustainability
/
Governance
/
F
inancial
review
0
100
200
300
400
2016
2017
2018
2019
2020
MEUR
Related
to
acquisitions
Other
capital
expenditures
Depreciation,
amortisation,
and
impairment
Cash
and
cash
equivalents
amounted
to
EUR
919
million
at
the
end
of
the
year
(358).
Additionally,
EUR
14
million
of
cash
and
cash
equivalents
pertained
to
assets
held
for
sale
(
11
).
Unutilised
committed
credit
facilities
totalled
EUR
660
million
(640).
Wä
rtsilä
had
interest
-bearing
debt
totalling
EUR
1,327
million
at
the
end
of
the
year
(1,096).
The
total
amount
of
short
-term
debt
maturing
within
the
next
12
months
was
EUR
198
million.
Long
-
term
loans
amounted
to
EUR
1,129
million.
Net
interest
-bearing
debt
totalled
EUR
394
million
(726).
Gearing
was
0.18
(0.30),
while
the
solvency
ratio
was
38.1%
(40.8).
Equity
per
share
was
3.68
euro
(4.05).
Capital
expenditure
Capital
expenditure
related
to
intangible
assets
and
property,
plant,
and
equipment
amounted
to
EUR
115
million
(116)
in
2020.
Capital
expenditure
related
to
acquisitions
and
investments
in
securities
totalled
EUR
2
million
(6).
Depreciation,
amortisation,
and
impairment
amounted
to
EUR
174
million
(180).
In
2021,
capital
expenditure
related
to
intangible
assets
and
property,
plant,
and
equipment
is
expected
to
be
below
depreciation,
amortisation,
and
impairment.
Gross
capital
expenditure
Innovations,
research
and
development
Wärtsilä
is
committed
to
helping
minimise
the
environmental
footprint
of
the
maritime
and
energy
industries.
Investments
in
R&D
are
central
to
securing
Wärtsilä’s
future
positioning,
and
will
continue
despite
the
prevailing
market
uncertainty.
Developing
the
use
of
alternative,
commercially
viable,
and
environmentally
friendly
fuels
for
the
future
is
a
key
focus
area
of
research
and
development,
as
is
improving
the
connectivity,
efficiency,
sustainability,
and
safety
of
customer
operations
through
the
increased
use
of
digital
solutions.
With
its
lifecycle
solution
s
offering,
Wärtsilä
goes
beyond
mere
maintenance
and
operation
by
delivering
guaranteed
performance
based
on
mutually
agreed
target
levels.
Research
and
develo
pment
expenditure
totalled
EUR
153
million
(
164
)
in
2020
,
which
represents
3.3%
of
net
sales
(3.2
).
Marine
In
the
development
of
viable
future
fuels
Wärtsilä
,
in
close
cooperation
with
Knutsen
OAS
Shipping
AS,
Repsol,
and
Sustainable
Energy
Catapult
Centr
e
,
initiated
the
world’s
first
long
-term,
full
-scale
testing
of
ammonia
as
a
fuel
in
a
marine
4
-stroke
combustion
engine
in
2020.
The
testing
is
supported
by
a
NOK
20
million
grant
from
the
Norwegian
Research
Council
through
the
DEMO
2000
programme.
Key
developments
in
the
context
of
portfolio
enhancements
included
the
completion
of
full
-scale
testing
of
Wärtsilä’s
LPG
fuel
supply
system
with
a
full
-
sized
2
-stroke
marine
engine
burning
liquid
petroleum
gas
(LPG)
as
fuel.
The
tests
were
completed
by
retrofitting
the
system
on
four
very
large
gas
carriers
(VLGC)
owned
by
the
Norwegian
operator
BW
LPG.
In
addition,
Wärtsilä
launched
its
FuelFlex
Injection
Control
Unit
upgrade
solution
to
meet
the
requirements
of
operating
RT
-
flex
type
2
-
stroke
diesel
engines
with
both
residual
and
low
-viscosity
marine
fuels.
This
is
particularly
relevant
in
view
of
the
industry’s
increasing
use
of
low
-sulphur
-content
fuels
in
order
to
be
compliant
with
sulphur
emission
regulations.
Wärtsilä
also
introduced
its
Compact
Reliq
reliquefaction
plant,
designed
to
reliquefy
boil
-off
gas
(BOG)
onboard
gas
carriers
and
LNG
bunker
vessels
and
keep
the
cargo
cool
under
all
operational
conditions.
Thanks
to
its
compact
design,
the
system
can
be
installed
on
existing
vessels
without
extensive
modification
work.
During
the
year,
Wärtsilä
also
upgraded
the
power
output
of
the
Wärtsilä
31DF
dual-
fuel
engine,
further
heightening
the
engine’s
sustainability
factor
as
a
result
of
lower
greenhouse
gas
emissions,
while
allowing
a
reduction
in
both
installation
and
maintenance
costs.
As
the
shipping
industry
enters
a
new
era
of
innovation
and
unprecedented
efficiency,
Wärtsilä
is
using
high
levels
of
connectivity
and
digitalisation
to
bring
value
and
optimisation
to
all
marine
applications,
and
to
en
hance
the
efficiency,
sustainability
,
and
safety
of
customer
operations.
Achievements
in
the
field
of
smart
navigation
included
the
launch
of
Navi
-
Port,
a
new
solution
for
the
seamless
exchange
of
data
between
ship
and
shore
,
enabling
just
-in-
time
arrival
.
This
was
implemented
in
collaboration
with
Carnival
Maritime
and
the
Hamburg
Vessel
Coordination
Center
(HVCC).
Moreover,
Wärtsilä
Voyage
and
PSA
Marine
successfully
completed
initial
sea
trials
for
the
‘IntelliTug’
T
his
is
Wärtsilä
/
Sustainability
/
Governance
/
F
inancial
review
0,0
1,0
2,0
3,0
4,0
0
50
100
150
200
2016
2017
2018
2019
2020
%
MEUR
R&D
expenditure
Percentage
of
net
sales
project
in
Singapore,
thereby
proving
IntelliTug’s
capability
to
avoid
a
variety
of
obstacles,
including
virtual
and
real
-life
moving
vessels.
It
was
the
first
trial
to
use
the
Maritime
and
Port
Authority
of
Singapore
’s
(
MPA
)
Maritime
Autonomous
Surface
Ship
(
MASS
)
regulatory
sandbox,
which
was
established
to
facilitate
the
testing
of
MASS
and
other
autonomous
technologies
in
a
safe
and
controlled
environment
within
the
Port
of
Singapore.
Wärtsilä
also
successfully
trialled
the
Wärtsilä
SmartMove
Suite,
a
unique
pairing
of
sensor
tech
nology
with
navigation
systems
for
semi
-autonomous
ship
movement.
The
American
Steamship
Company
became
the
first
to
install
Wärtsilä
SmartMove
solutions
,
which
will
be
used
for
hands
-off
transit
along
the
Cuyahoga
River
in
Ohio,
US
A.
The
year
2020
also
saw
the
laun
ch
of
a
number
of
remote
support
services.
These
included
the
global
Smart
Support
Centre
service,
which
is
designed
to
deliver
operational
support
via
virtual
service
engineers
to
all
Wärtsilä
Voyage
equipment,
and
the
Assured
Operations
remote
support
se
rvice
for
Wärtsilä
4
-stroke
and
2
-stroke
engine
customers.
This
enables
technical
experts
to
assess
and
resolve
operational
issues
via
a
remote
connection
between
seagoing
vessels
and
Wärtsilä’s
Expertise
Centres.
During
the
year,
Wärtsilä
also
made
the
digital
predictive
maintenance
product
Expert
Insight
available
for
2
-stroke
engines
.
The
company
simultaneously
released
a
minimum
viable
product
for
remote
monitoring
of
scrubbers
to
provide
continuous
fleet
-wide
insight
into
vessel
compliance
and
scrubber
utilisation.
Moreover,
Wärtsilä
Voyage
expedited
the
launch
of
Wärtsilä’s
new
cloud
simulation
platform
to
enable
maritime
academies
and
seafarer
schools
to
continue
training
despite
the
lockdowns
and
distancing
imposed
by
the
COVID
-
19
outbreak.
The
solut
ion
was
selected
by
Anglo
-
Eastern
,
a
leading
ship
manage
ment
company,
to
provide
online
capacity
for
the
company’s
training
centres
in
India,
the
Philippines
,
and
Ukraine.
The
cloud
-based
simulators
are
being
used
for
navigation,
engineering,
and
liquid
cargo
handling
training.
Energy
In
line
with
its
aim
to
lead
the
transition
towards
a
100%
renewable
energy
future,
Wärtsilä
launched
the
Energy
Transition
Lab,
an
open
-data
platform
for
the
energy
industry
to
understand
the
impact
of
greater
utilisation
of
renewable
energy
and
the
effects
of
COVID
-19,
and
help
accelerate
the
energy
transition.
The
tool
provides
detailed
data
on
electricity
generation,
demand,
and
pricing
for
the
EU
countries
and
the
UK.
It
allows
users
to
model
how
systems
could
operate
in
the
future
with
more
renewables,
helping
to
pinpoint
problem
areas
and
highlighting
where
to
focus
policies
and
investments.
Key
achievements
in
the
advancement
of
engine
technology
included
Wärtsilä’s
highly
efficient
12
MWe
Wärtsilä
31SG
gas
-fuelled
generating
set
being
awarded
type
certification
by
the
classification
society
DNV
GL.
This
is
globally
the
largest
synchronous
generating
set
of
this
technology
to
have
been
awarded
the
unit
certificate
after
full
-scale
testing.
The
certification
verifies
the
design
and
engineering
standards
as
being
in
full
compliance
with
Germany’s
grid
code
requirements,
the
first
country
in
Europe
to
have
implemented
guidelines
for
grid
code
compliance,
although
other
countries
have
already
or
are
in
the
process
of
requiring
similar
compliance.
Wärtsilä
also
announced
during
the
year
that
it
is
developing
the
combustion
process
in
its
gas
engines
to
enable
them
over
time
to
burn
100%
hydrogen
fuel.
Wärtsilä
has
researched
hydrogen
as
a
fuel
for
20
years,
and
has
tested
its
engines
with
blends
of
up
to
60%
hydrogen
and
40%
natural
gas.
This
development
is
part
of
the
company’s
strategy
to
future
-proof
its
engine
technology
in
line
with
the
global
trend
towards
decarbonisation
of
the
energy
and
marine
markets.
In
addition
to
hydrogen,
other
potential
renewable
fuels
are
being
studied
for
future
applications.
Wärtsilä
engines
are
already
capable
of
combusting
100%
synthetic
carbon
-neutral
methane
and
methanol.
Developments
in
the
area
of
Power
-to
-
X
included
funding
granted
by
Business
Finland
for
the
X-Ahead
project,
as
well
as
an
agreement
with
Vantaa
Energy
Ltd.
regarding
a
joint
concept
feasibility
study
for
a
power
-to
-gas
facility
at
Vantaa
Energy’s
waste
-to
-energy
plant
in
the
city
of
Vantaa.
The
X-
Ahead
project
aims
at
developing
deep
expertise
in
both
the
technical
and
business
potential
of
Power
-to
-X,
which
will
be
used
to
promote
a
carbon
-neutral
economy
in
Finland.
It
will
also
act
as
a
base
for
defining
Wärtsilä’s
role
in
this
field
as
part
of
the
g
lobal
transition
to
carbon
-neutral
solutions.
Vantaa
Energy’s
power
-to
-
gas
facility
would
produce
carbon-
neutral
synthetic
biogas
using
carbon
dioxide
emissions
and
electricity
generated
at
the
waste
-to
-energy
plant.
The
purpose
of
the
joint
study
is
to
confirm
the
optimal
size
of
the
project
and
the
cost
of
synthetic
biogas
for
district
heating,
as
well
as
to
understand
the
boundary
conditions
for
project
feasibility.
Research
and
development
expenditure
Strategic
projects
In
February,
Wärtsilä
and
DNV
GL
agreed
to
work
together
to
contribute
to
the
marine
industry’s
ongoing
digital
transformation.
In
particular,
the
two
companies
wish
to
further
explore
the
potential
use
of
digital
technologies,
collaborative
data
sharing,
and
standardisation
to
enhance
the
performance
of
existing
products
and
services,
and
to
develop
new
ones.
The
project
will
examine
the
application
of
digital
technologies
in
areas
such
as
autonomous
ships,
T
his
is
Wärtsilä
/
Sustainability
/
Governance
/
F
inancial
review
advanced
remote
services,
new
bridge
technologies,
and
data
sharing.
Cyber
security
will
be
another
natural
area
of
co
-operation.
In
March,
Wärtsilä
together
with
a
consortium
of
six
other
industry
and
academic
partners,
was
awarded
EU
funding
for
a
major
project
named
SeaTech.
The
project
is
aimed
at
reducing
fuel
consumption
and
lowering
emission
levels
for
shipping
by
developing
ship
engine
and
propulsion
systems
to
enable
precise
control
of
the
engine
and
capturing
wave
energy
to
produce
extra
thrust.
Wärtsilä
also
signed
a
licence
and
co
-operation
agreement
covering
the
future
development,
sales,
and
servicing
of
gate
rudders
with
Kuribayashi
Steamship
in
Japan.
As
an
authorised
license
holder
and
partner,
Wärtsilä
intends
to
fully
integrate
gate
rudders
within
its
propulsion
product
designs
and
will
focus
on
global
markets
outside
Japan.
Gate
rudder
technology
lowers
fuel
consumption
and
reduces
emissions,
while
improving
manoeuvrability
and
course
stability
in
both
calm
and
rough
seas.
In
June,
Wärtsilä
joined
a
global
consortium
to
develop
the
Mayflower
Autonomous
ship
project,
which
will
enable
the
world’s
first
fully
autonomous,
unmanned
vessel
to
cross
the
Atlantic.
Wärtsilä
Voyage
will
equip
the
ship
with
the
Wärtsilä
RS24
system,
a
ground
-breaking
high
-speed,
high
-resolution
FMCW
K-
Band
radar
designed
to
provide
optimised
levels
of
situational
awareness,
especially
in
densely
populated
marine
environments.
Wärtsilä
also
joined
ING
Bank,
Engie,
and
the
Port
of
Rotterdam
Authority
to
form
Zero
Emission
Services
B.V.
(ZES),
an
enterprise
aimed
at
making
inland
waterway
shipping
more
sustainable.
The
concept
is
based
on
the
use
of
replaceable
battery
containers
charged
with
renewable
energy.
It
will
be
utilised
,
among
others,
by
the
Heineken
beer
company
and
is
supported
by
the
Dutch
Ministry
of
Infrastructure
and
Water
Managem
ent.
In
July,
Wärtsilä
joined
a
global
coalition
dedicated
to
accelerating
the
energy
transition
in
the
transport
and
logistics
industries,
together
with
a
cluster
of
market
-leading
companies
representing
a
broad
spectrum
of
industry
stakeholders.
The
aim
of
the
coalition
is
to
drive
the
development
of
energy
sources
and
technologies
in
order
to
curb
global
warming,
reduce
air
pollution,
and
protect
biodiversity.
The
members
will
pool
their
R&D
efforts
in
pursuit
of
three
key
goals:
unlocking
a
more
extensive
portfolio
of
clean
energy
sources,
lowering
energy
consumption
per
kilometre
-equivalent
for
transported
goods
,
and
eliminating
a
substantial
proportion
of
the
harmful
emissions
being
released
into
the
atmosphere.
In
October,
Wärtsilä
signed
a
Memorandum
of
Understanding
(MoU)
tied
to
a
license
and
c
o
-operation
agreement
with
the
UK
-based
Anemoi
Marine
Technologies
for
the
future
sales
and
servicing
of
rotor
sail
solutions
to
the
shipping
industry.
Rotor
s
ails
are
comprised
of
vertical
cylinders
which,
when
driven
to
rotate,
harness
the
renewable
power
of
the
wind
to
propel
ships.
These
highly
efficient
mechanical
sails
will
provide
additional
thrust
to
vessels
and
deliver
significant
fuel
and
emission
savings.
Wärtsilä
will
fully
integrate
Anemoi
Marine
Technologies’
rotor
s
ails
within
its
p
ropulsion
business
and
promote
the
solution
for
both
newbuild
projects
and
for
retrofitting
to
existing
ships.
In
December,
Wärtsilä
joined
the
CHEK
project
which
aims
to
achieve
zero
emission
s
shipping.
The
project
will
develop
and
demonstrate
a
wind
energy
optimised
bulk
carrier
,
and
a
hydrogen
powered
cruise
ship
equipped
with
a
combination
of
innovative
technologies
to
reduce
greenhouse
gas
emissions
by
99%,
achieve
at
least
50%
energy
savings
,
and
reduce
black
carbon
emissions
by
over
95%.
The
CHEK
partners
are
the
University
of
Vaasa
(coordinator),
Wärtsilä,
Cargill
International,
MSC
Cruises,
Lloyd’s
Register,
the
World
Maritime
University,
Silverstream
Technologies,
HASYTEC
Electronics,
Deltamarin,
Climeon
,
and
BAR
Technologies.
Capacity
adjustments
In
March,
Wärtsilä
announced
that
proactive
steps
would
be
taken
to
minimise
the
negative
business
impact
of
the
COVID
-19
pandemic
and
the
measures
initiated
to
contain
it.
These
include
d
reducing
working
hours
and
initiating
temporary
layoffs,
as
well
as
streamlining
hiring
and
minimising
the
use
of
external
personnel
and
consultants.
Discretionary
spending
was
also
reduced
and
non
-critical
development
projects
postponed.
Decisions
on
temporary
cost
reduction
actions
were
taken
in
key
countries
where
such
measures
were
deemed
necessary.
The
actions
taken
resulted
in
temporary
cost
savings
of
approximately
EUR
100
million
being
recognised
during
the
year,
which
was
in
line
with
initial
expectations
.
The
market
situation
is
continuously
monitored
,
and
further
actions
will
be
taken
as
needed.
Changes
in
organisational
structure
Wärtsilä’s
new
organisational
structure
became
operational
on
1
July
2020.
With
the
new
structure,
Wärtsilä
aims
to
accelerate
strategy
execution
and
drive
long
-term
performance.
Marine
Power,
Marine
Systems,
and
Energy
will
focus
on
delivering
profitable
growth
by
strengthening
their
offering
of
solutions
and
lifecycle
value
propositions.
Established
through
the
combination
of
acquisitions
during
the
past
few
years,
notably
Eniram
and
more
recently
Transas,
Voyage
positions
Wärtsilä
as
a
market
leader
in
digital
solutions
for
the
commercial
marine
industry.
Voyage’s
focus
will
be
on
scaling
and
developing
the
business,
with
the
support
of
continued
investments
in
R&D,
sales
and
marketing,
in
order
to
create
a
basis
for
sustainable,
profitable
growth
over
the
long
-term.
Portfolio
Business
is
run
as
an
independent
entity,
with
the
objective
of
unlocking
the
value
of
business
units
that
are
not
central
to
Wärtsilä’s
strategy.
Personnel
Wärtsilä
had
17,792
(18,795)
employees
at
the
end
of
the
year.
On
average,
the
number
of
personnel
totalled
18,307
(19,110)
in
the
year
of
2020
.
T
his
is
Wärtsilä
/
Sustainability
/
Governance
/
F
inancial
review
0
5
000
10
000
15
000
20
000
2016
2017
2018
2019
2020
Personnel
at
the
end
of
the
financial
period
Personnel
on
average
Personnel
in
Finland
Of
Wärtsilä’s
total
number
of
employees,
21%
(20)
were
located
in
Finland
and
41%
(42)
elsewhere
in
Europe.
Personnel
employed
in
Asia
represented
22%
(23)
of
the
total,
personnel
in
the
Americas
11%
(11),
and
personnel
in
other
countries
5%
(4).
Personnel
Changes
in
management
In
addition
to
the
appointment
of
a
new
President
and
CEO,
the
below
changes
in
Wärtsilä’s
Board
of
Management
took
place
during
2020
:
Following
the
announcement
that
Wärtsilä’s
Marine
Business
would
be
reorganised
into
three
independent
businesses,
Roger
Holm
(b.
1972,
M.Sc.
Economics),
previously
the
President
of
Wärtsilä
Marine
Business
and
Executive
Vice
President,
was
appointed
President
of
Wärtsilä
Marine
Power
and
Executive
Vice
President
as
of
5
March
2020,
Tamara
de
Gruyter
(b.
1972,
B.Sc.
Shipbuilding
Engineering)
was
appointed
President
of
Wärtsilä
Marine
Systems
and
Executive
Vice
President
as
of
5
March
2020,
and
Sean
Fernback
(b.
1963,
Dipl.
Electronics
Engineering)
was
appointed
President
of
Wärtsilä
Voyage
and
Executive
Vice
President
as
of
4
May
2020.
In
July,
Sushil
Purohit
(b.
1972,
B.Sc.
(Eng.),
MBA)
was
appointed
President
of
Wärtsilä
Energy
and
Executive
Vice
President
as
of
3
August
2020.
He
replaced
Marco
Wirén,
who
left
Wärtsilä
on
31
August
2020
for
a
position
outside
the
Group.
Non
-
financial
report
Increasing
environmental
awareness
is
resulting
in
fundamental
changes
in
both
the
marine
and
energy
industries.
Thanks
to
its
various
technologies
and
specialised
services,
Wärtsilä
is
well
positioned
to
reduce
exhaust
emissions
and
the
use
of
natural
resources,
as
well
as
to
support
its
customers
in
preparing
for
new
regulatory
requirements.
Wärtsilä’s
R&D
efforts
continue
to
focus
on
the
development
of
advanced
environmental
technologies
and
solutions.
The
company
is
committed
to
supporting
the
UN
Global
Compact
and
its
principles
with
respect
to
human
rights,
labour,
the
environment,
and
anti
-corruption.
Wärtsilä
is
also
committed
to
supporting
the
UN
Sustainable
Development
Goals
that
deal
with
issues
to
which
Wärtsilä
contributes
in
a
positive
way.
Such
goals
include
those
relate
d
to
clean
energy,
a
low
-carbon
marine
ecosystem,
and
responsible
business
conduct.
Responsible
business
conduct
The
Wärtsilä
Code
of
Conduct
defines
common
rules
for
all
employees,
and
provides
guidance
on
Wärtsilä’s
approach
to
responsible
business
practices.
The
Code
of
Conduct
is
complemented
by
group
-wide
policies,
including
the
quality,
environmental,
health
and
safety
policy,
the
corporate
policy
on
equal
opportunities
and
fair
employment
practices,
as
well
as
policies
related
to
anti
-corruption,
compliance
reporting,
and
sourcing
and
purchasing.
Wärtsilä
takes
an
active
approach
to
the
application
of
the
Code
of
Conduct
and
promotes
its
implementation
through
the
effective
communication
of
its
contents
to
its
employees.
Wärtsilä
monitors
the
application
of
the
Code
internally
to
ensure
understanding
and
commitment
throughout
the
organisation.
At
the
end
of
2020,
17,039
employees,
covering
9
6
%
of
the
total
number
of
employees,
had
participated
in
the
Code
of
Conduct
training
programme.
Suppliers
and
business
partners
are
an
integral
part
of
the
total
value
chain
of
the
products
and
services
of
Wärtsilä.
They
are
expected
to
conduct
their
businesses
in
compliance
with
the
same
high
legal
and
ethical
standards
and
business
practices
as
Wärtsilä.
Information
on
Wärtsilä’s
requirements
is
included
in
supplier
agreement
templates.
Environmental
performance
Wärtsilä’s
main
contribution
to
improved
environmental
performance
lies
in
providing
its
customers
with
reliable
and
safe
technologies
and
services,
which,
in
addition
to
enabling
environmental
compliance,
support
the
sustainable
development
of
the
marine
and
energy
industries.
Wärtsilä’s
products
and
solutions
are
designed
to
operate
for
up
to
30
years.
Therefore,
focusing
R&D
efforts
on
improving
the
product
or
system
level
performance
is
crucial,
as
is
adopting
a
lifecycle
approach
to
performance
optimisation.
In
addition
to
improving
the
environmental
performance
of
its
product
s
and
solutions,
Wärtsilä
also
continuously
monitors
the
impact
caused
by
its
own
activities
and
targets
reduced
energy
consumption
in
its
facilities.
Wärtsilä's
quality,
environmental,
health
and
safety
policy
sets
principles
for
managing
the
environmental
impacts
of
Wärtsilä’s
products
and
services.
The
potential
risks
related
to
environmental
matters
and
climate
change
are
in
the
areas
of
regulatory
emission
restrictions
and
changes
in
customer
attitudes
to
using
combustion
engines
and
fossil
fuels.
Risks
are
managed
by
focusing
on
product
efficiency
improvement
and
emission
reduction
in
R&D
activities,
as
well
as
by
developing
a
wide
product
offering,
including
technologies
related
to
waste
reduction,
noise
abatement,
and
effluent
and
T
his
is
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/
Sustainability
/
Governance
/
F
inancial
review
ballast
water
treatment
.
During
2020,
R&D
investments
totalled
EUR
153
million,
w
hich
represents
3.3%
of
net
sales.
The
majority
of
these
investments
targeted
improved
environmental
performance.
Significant
achievements
related
to
sustainable
innovation
included
the
progress
made
in
developing
engine
technology
to
burn
zero
-carbon
fuels.
For
the
marine
markets,
Wärtsilä
launched
several
solutions
in
support
of
its
Smart
Marine
Ecosystem
vision,
including
solutions
for
smart
navigation,
a
number
of
remote
support
services,
as
well
as
a
cloud
simulation
platform
enabling
remote
training.
In
the
energy
sector,
Wärtsilä
introduced
the
GridSolv
Quantum
energy
storage
system,
a
fully
integrated
modular
and
compact
solution
that
enables
the
rapid
deployment
of
cost
-effective
energy
storage,
as
well
as
data-
based
solutions
to
better
understand
the
impact
of
the
energy
transition.
Social
and
employee
matters
Wärtsilä
is
a
responsible
employer,
offering
employees
a
workplace
where
openness,
respect,
trust,
equal
opportunities,
and
scope
for
personal
development
prevail.
Wärtsilä
is
a
signatory
of
the
UN
Global
Compact
initiative
and
supports
the
work
-related
rights
defined
by
the
International
Labour
Organization
(ILO).
Wärtsilä's
corporate
policy
on
equal
opportunities
and
fair
employment
practices
creates
a
common
framework
for
employee
practices
in
all
Wärtsilä
companies.
People
management
processes,
tools,
and
ways
of
working
are
developed
to
ensure
consistency
across
national
and
organisational
boundaries.
Wärtsilä
has
a
global
job
grading
system
and
rewarding
principles
to
ensure
transparency
and
fairness
for
all
employees,
which
are
followed
by
all
the
entities
in
Wärtsilä
globally.
The
objective
of
Wärtsilä’s
people
management
strategy
is
to
ensure
that
the
businesses
have
the
required
resources,
and
skilled
and
motivated
people
at
their
disposal.
In
order
to
develop
their
competences,
employees
are
offered
a
wide
variety
of
internal
training
courses,
including
topics
like
technology,
health
and
safety,
language
and
culture,
project
management,
environment,
security,
and
leadership.
The
avera
ge
number
of
learning
days
was
1.1
per
employee
in
2020.
Wärtsilä
aims
at
offering
its
employees
and
contractors
a
hazard
-free
working
environment,
and
at
minimising
the
health
and
safety
risks
associated
with
the
use
of
its
products
and
services.
The
company’s
occupational
health
and
safety
principles
are
defined
in
the
Code
of
Conduct,
the
quality,
environmental,
health
and
safety
(QEHS)
policy,
and
in
the
directive
on
environment,
health,
and
safety
(EHS).
Wärtsilä's
units
are
required
to
have
a
management
system
in
place
that
conforms
to
the
QEHS
Policy
and
the
EHS
directive.
In
addition
to
the
management
system,
Wärtsilä
companies
apply
occupational
health
and
safety
programmes
as
required
by
local
legislation.
Wärtsilä’s
aim
is
to
reach
a
long
-term
goal
of
zero
injuries.
In
2020,
the
corporate
lost
-time
injury
frequency
rate
was
2.03
(2.25).
Respect
for
human
rights
Wärtsilä
supports
and
respects
basic
human
values
as
outlined
in
the
UN's
universal
declaration
of
human
rights.
Wärtsilä
is
also
a
signatory
of
the
UN
Global
Compact
and
is
thereby
committed
to
its
principles
with
respect
to
human
rights,
labour,
the
environment
,
and
anti
-corruption.
No
employee
is
allowed
to
take
any
action
that
violates
these
human
rights
principles,
either
directly
or
indirectly.
Wärtsilä
does
not
accept
the
use
of
forced
labour
or
child
labour
in
any
form.
Human
and
labour
rights
are
a
part
of
the
Code
of
Conduct
training
material,
and
are
included
in
Wärtsilä’s
policy
on
equal
opportunities
and
fair
employment
practices
as
well
as
in
the
company’s
supplier
handbook.
Anti
-
corruption
and
bribery
matters
Wärtsilä's
Code
of
Conduct,
anti
-corruption
policy,
and
broker
directive
expressly
prohibit
the
company
and
its
employees
from
offering
or
accepting
any
kind
of
benefit
considered
a
bribe
and
from
taking
actions
that
could
give
rise
to
a
conflict
of
interest
or
breach
of
loyalty.
The
instructions
make
it
compulsory
to
comply
with
anti
-corruption
laws
of
all
the
countries
in
which
Wärtsilä
does
or
intends
to
do
business
and
urge
the
reporting
of
any
cases
of
corruption
and
bribery.
Wärtsilä
is
aware
of
the
risk
of
being
subject
to
fraud
by
external
business
parties,
and
that
the
risk
of
corruption
and
fraud
is
heightened
in
many
markets
where
the
company
operates.
Therefore
,
full
compliance
with
a
stringent
anti-
corruption
regime
is
required
of
all
employees.
An
extensive
training
programme
is
in
place
for
personnel
on
anti-
corruption
principles
and
applicable
legislation
as
well
as
the
relevant
company
policies
and
procedur
es.
By
the
end
of
2020,
93%
of
Wärtsilä’s
employees
had
participated
in
anti-
corruption
trainings.
Employees
are
encouraged
to
provide
feedback
and
communicate
suspected
misconduct
to
line
management
or
directly
to
the
Compliance,
L
egal
A
ffairs
,
or
Interna
l
Audit
function.
Wärtsilä
also
has
a
dedicated
tool
through
which
employees
can
report
infringements.
Reporting
segments
Wärtsilä
Marine
Power
Marine
Power’s
o
rder
intake
in
2020
decreased
by
23%
to
EUR
1,737
million
(2,247)
compared
to
the
previous
year.
Book
-to
-bill
was
0.99
(1.17).
Service
order
intake
decreased
by
19%
to
EUR
1,070
million
(1,315),
with
the
largest
decline
seen
in
the
cruise
segment
where
vessel
utilisation
remained
low
throughout
the
year.
Equipment
order
intake
decreased
by
28%
to
EUR
667
million
(931).
Demand
was
the
highest
in
the
merchant
segment
which,
including
both
traditional
merchant
vessels
and
gas
carriers,
represented
35%
and
42%
of
the
order
intake
of
equipment
and
services,
respectively.
Orders
received
from
this
segment
included
a
sizeable
order
to
supply
dual
-fuel
engines
to
six
new
LNG
vessels
and
a
contract
to
supply
a
fully
integrated
Wärtsilä
hybrid
solution
for
Misje
Rederi’s
three
newbuild
eco
-friendly
5,000
DWT
bulk
carriers.
Other
noteworthy
orders
included
a
contract
to
supply
the
engines
and
a
range
of
electric
solutions
for
two
new
ferries
under
construction
for
Finnlines,
as
well
as
a
contract
to
supply
Wärtsilä
14
EUR
Stage
V
T
his
is
Wärtsilä
/
Sustainability
/
Governance
/
F
inancial
review
compliant
engines
and
related
emissions
control
after-
treatment
systems
for
two
new
passenger
ferries
being
built
for
operation
between
Switzerland
and
France.
The
order
book
at
the
end
of
the
year
decreased
by
9%
to
EUR
1,839
million
(2,019).
Net
sales
decreased
by
9%
to
EUR
1,748
million
(1,923)
compared
to
the
previous
year.
Service
net
sales
decreased
by
14%
to
EUR
1,096
million
(1,279),
while
equipment
net
sales
increased
by
1%
to
EUR
652
million
(643).
The
comparable
operating
result
amounted
to
EUR
137
million
(273)
or
7.8%
of
net
sales
(14.2).
The
result
was
burdened
by
the
COVID
-19
related
decline
in
the
service
business
,
as
well
as
by
weaker
absorption
of
fixed
costs
and
lower
utilisation.
Wärtsilä
Marine
Systems
Marine
Systems’
o
rder
intake
in
2020
decreased
by
28%
to
EUR
539
million
(754
)
compared
to
the
previous
year
,
as
reduced
fuel
spreads
scaled
back
scrubber
investments
.
Book
-to
-bill
was
0.67
(0.79).
Service
order
intake
decreased
by
11%
to
EUR
205
million
(230).
Equipment
order
intake
decreased
by
36%
to
EUR
334
million
(523).
Noteworthy
orders
received
during
the
year
included
the
first
order
for
the
Compact
Reliq
reliquefaction
plant,
a
system
designed
to
reliquefy
boil
-off
gas
(BOG)
onboard
gas
carriers
and
LNG
bunker
vessels
and
keep
the
cargo
cool
under
all
operational
conditions.
Wärtsilä
also
received
a
major
contract
to
supply
and
construct
a
plant
for
the
production
of
CO
2
-neutral
liquid
transport
fuels,
with
a
capacity
of
approximately
100,000
tons
per
year
to
be
located
in
Cologne,
Germany.
The
order
book
at
the
end
of
the
year
decreased
by
31%
to
EUR
857
million
(1,232
)
due
to
the
shortage
of
scrubber
orders.
Net
sales
decreased
by
15%
to
EUR
808
million
(952)
compared
to
the
previous
year.
Service
net
sales
increased
by
8%
to
EUR
219
million
(202),
while
equipment
net
sales
decreased
by
22%
to
EUR
588
million
(750).
The
comparable
operating
result
amounted
to
EUR
83
million
(60)
or
10.3%
of
net
sales
(6.3).
The
operating
result
for
the
comparison
period
was
weakened
by
charges
for
cost
overruns
in
certain
gas
solution
projects.
Wärtsilä
Voyage
Voyage’s
o
rder
intake
in
20
20
decreased
by
16%
to
EUR
262
million
(310)
compared
to
the
previous
year.
Book
-to
-bill
was
1.06
(1.11).
Service
order
intake
decreased
by
22%
to
EUR
92
million
(117),
while
equipment
order
intake
decreased
by
12%
to
EUR
170
million
(193).
While
COVID
-19
put
pressure
on
orders
received
from
the
cruise
industry,
order
intake
for
fleet
optimisation
solutions
developed
well
and
Wärtsilä
also
received
contracts
for
major
newbuild
projects
in
other
segments.
Highlights
of
the
year
included
a
contract
with
UltraShip
Denmark
to
install
the
cloud
-based
Wärtsilä
Fleet
Operations
Solution
(
FOS
)
across
their
entire
fleet
in
a
move
that
will
enable
direct
and
real
-time
connection
between
shore
and
vessel
systems
for
collaborative
voyage
planning
and
execution.
The
order
book
at
the
end
of
the
year
was
stable
at
EUR
275
million
(274).
Net
sales
decreased
by
12%
to
EUR
248
million
(280)
compared
to
the
previous
year.
The
decline
was
primarily
due
to
the
COVID
-19
pandemic,
which
has
resulted
in
project
postponements
and
lower
transactional
service
business.
Service
net
sales
decreased
by
18%
to
EUR
85
million
(103),
while
equipment
net
sales
decreased
by
8%
to
EUR
163
million
(177).
The
comparable
operating
result
amounted
to
EUR
-
41
million
(-31)
or
-16.5%
of
net
sales
(
-1
1.2).
The
result
was
negatively
impacted
by
lower
sales
volumes
and
a
less
favourable
service
mix.
In
addition,
investments
in
digital
competences
have
been
increased
to
further
accelerate
the
execution
of
Wärtsilä’s
Smart
Marine
strategy.
In
both
the
repo
rting
and
the
comparison
period,
the
operating
result
was
burdened
by
amortisation
resulting
from
various
acquisitions.
Wärtsilä
Energy
Energy’s
o
rder
intake
in
2020
decreased
by
7%
to
EUR
1,653
million
(1,769
)
compared
to
the
previous
year.
Book
-
to
-bill
was
1.02
(0.99).
Service
order
intake
decreased
by
9%
to
EUR
840
million
(920),
while
equipment
order
intake
decreased
by
4%
to
EUR
813
million
(849).
Demand
for
equipment
was
evenly
split
across
geographical
areas.
Noteworthy
equipment
orders
received
during
the
year
included
a
200
MW
flexible
baseload
plant
in
South
America
to
support
the
integration
of
renewables.
Activity
in
the
energy
storage
market
was
resilient,
with
orders
including
a
90
MW/90
MWh
storage
system
to
provide
flexibility
and
grid
stability
in
South
East
Asia,
an
order
for
a
123
MW/185
MWh
storage
system
to
support
a
major
renewable
project
in
the
USA,
as
well
as
the
first
-ever
GridSolv
Quantum
storage
system
in
the
USA.
Received
service
orde
rs
included
a
5-
year
maintenance
agreement
to
support
the
availability,
performance,
and
reliability
of
a
200
MW
power
plant
in
Cambodia,
as
well
as
a
gas
conversion
project
in
Brazil
along
with
a
related
10
-year
operations
and
maintenance
agreement
renewa
l.
The
order
book
at
the
end
of
the
year
decreased
by
9%
to
EUR
1,830
million
(2,014).
Net
sales
decreased
by
9%
to
EUR
1,620
million
(1,779)
compared
to
the
previous
year.
Service
net
sales
decreased
by
2%
to
EUR
782
million
(802),
while
equipment
net
sales
decreased
by
14%
to
EUR
838
million
(977).
The
comparable
operating
result
amounted
to
EUR
101
million
(155)
or
6.3%
of
net
sales
(8.7).
The
result
was
burdened
by
COVID
-19
impacts
in
the
form
of
delivery
delays,
weaker
absorption
of
fixed
costs,
and
increased
costs
for
project
execution,
as
well
as
by
the
delivery
of
projects
communicated
in
2019
to
be
affected
by
cost
overruns.
Other
business
activities
Wärtsilä
Portfolio
Business
Portfolio
Business’
o
rder
intake
in
2020
decreased
by
32%
to
EUR
168
mil
lion
(248)
compared
to
the
previous
year.
Activity
was
the
highest
in
American
Hydro,
where
orders
received
during
the
year
included
a
contract
to
perform
rehabilitation
services
and
to
complete
the
upgrade
and
refurbishment
of
two
units
at
the
Keokuk
hydroelectric
plant
in
Iowa,
USA.
T
his
is
Wärtsilä
/
Sustainability
/
Governance
/
F
inancial
review
Water
&
Waste
and
Entertainment
Systems
continued
to
work
closely
with
the
Italian
shipbuilder
Fincantieri
for
a
number
of
ships,
resulting
in
orders
for
complete
waste
treatment
systems
and
fresh
water
generators
for
two
vessels,
as
well
as
entertainment
systems
for
two
new
series
of
ships
comprising
eight
vessels.
The
order
book
at
the
end
of
the
year
decreased
by
24%
to
EUR
257
million
(338).
Net
sales
decreased
by
24%
to
EUR
181
million
(236)
compared
to
the
previous
year.
COVID
-19
lowered
activity,
particularly
in
the
Water
&
Waste
and
Entertainment
Systems
business
units,
where
especially
the
cruise
segment
was
heavily
affected.
The
comparable
operating
result
amounted
to
EUR
-6
million
(0)
or
-3.1%
of
net
sales
(0.1).
Items
affecting
comparability
amounting
to
EUR
24
million
were
recognised
during
the
year
largely
as
a
result
of
the
divestments
of
Wärtsilä
JOVYATLAS
GmbH
and
Wärtsilä
Valves
Ltd.
Divestments
In
September,
Wärtsilä
announced
the
divestment
of
100%
of
the
shares
in
Wärtsilä
JOVYATLAS
GmbH
to
Jacob
Waitz
Industrie
GmbH,
a
German
based
industry
holding.
The
Wärtsilä
JOVYATLAS
offering
consists
of
UPS
systems,
rectifiers,
power
inverters,
frequency
transformers
,
and
resistors
with
related
services.
The
company,
which
became
part
of
Wärtsilä
as
a
result
of
the
acquisition
of
L
-3
Communications
MSI
in
2015,
is
located
in
Jemgum
in
Germany
and
currently
has
some
125
employees.
In
2019,
its
annual
revenues
were
EUR
20
million.
The
divestment
is
driving
Wärtsilä’s
focus
on
creating
a
stronger
and
simpler
core
business.
In
October,
Wärtsilä
announced
the
divestment
of
100%
of
the
shares
in
Wärtsilä
Valves
Ltd
to
an
affiliate
of
Evergreen
Capital
L.P.,
based
in
New
York,
US
A.
Its
activities
include
engineering,
assembly,
testing,
sales
,
and
delivery
of
nickel
aluminium
bronze
(NAB)
and
duplex
valves
for
the
marine,
oil
and
gas
,
and
energy
markets.
Additionally,
it
offers
applications
for
Valves’
products,
including
FPSO,
petrochemical
facilities,
power
generation,
LNG,
naval
marine,
marine
services,
waste
water
treatment
plants
,
and
pipelines.
Wärtsilä
Valves
became
part
of
Wärtsilä
as
a
result
of
the
Hamworthy
acquisition
in
2012.
The
company
is
located
in
Brough,
UK
and
currently
has
approximately
65
e
mployees.
The
annual
revenues
were
approximately
EUR
15
million
in
2019.
In
December,
Wärtsilä
closed
the
divestment
of
Wärtsilä
ELAC
Nautik
GmbH
(ELAC
Nautik)
to
Cohort
plc,
a
UK
listed
company,
specialising
in
defence,
security
and
related
market
sectors.
ELAC
Nautik
became
part
of
Wärtsilä
as
a
result
of
the
acquisition
of
L
-3
Communications
MSI
in
2015.
Its
main
market
focus
is
on
hydroacoustic
products,
including
sonars,
underwater
communication
and
echo
systems
for
small
and
medium
sized
military
submarines.
The
company
is
located
in
Kiel,
Germany
and
employs
125
people.
The
annual
revenues
were
approximately
EUR
20
million
in
2019.
Risks
and
business
uncertainties
The
COVID
-19
pandemic
and
the
measures
taken
to
contain
its
spread
represent
the
main
sh
ort
-term
risk
to
business
operations
and
the
demand
environment,
impacting
global
energy
consumption,
seaborne
trade,
as
well
as
consumer
confidence
in
cruise
and
ferry
transportation.
Mobility
restrictions
continue
to
affect
business
activities,
project
delivery
schedules,
and
the
ability
to
perform
service
activities.
Disruptions
to
global
supply
chains
resulting
from
new
waves
of
COVID
-19
infections
are
a
risk
for
both
factory
activity
and
the
delivery
of
spare
parts
and
services.
Although
vaccinations
a
gainst
COVID
-19
have
started
in
many
countries,
there
is
still
significant
uncertainty
over
the
duration
of
the
pandemic
and
how
quickly
country
level
vaccination
program
mes
will
be
implemented
on
a
global
scale.
In
the
marine
markets,
the
risk
of
a
prolonged
period
of
weak
demand
affects
the
investment
decisions
of
shipowners
and
operators,
who
are
forced
to
re
-evaluate
their
strategies
related
to
both
vessel
newbuilding
and
existing
fleets,
and
to
cut
capital
and
operational
expenditures.
The
prevailing
market
conditions
may
result
in
continued
price
pressure
and
an
elevated
risk
of
order
cancellations
or
slippage.
Surplus
capacity
can
drive
further
consolidation
among
shipyards,
ship
owners,
and
operators
in
certain
segments,
which
may
result
in
lower
capture
rates
in
services
and
equipment
sales
due
to
changed
customer
relationships.
Extensions
of
no
-sail
orders,
the
limited
ability
or
desire
of
people
to
travel,
and
the
escalation
of
COVID
-19
cases
are
a
risk
for
recovery
in
the
cruise
and
ferry
markets.
In
the
offshore
industry,
crude
oil
price
volatility
is
pushing
the
oil
majors
to
reduce
their
spending,
exploration
activity,
and
operational
costs,
leading
to
an
increasing
number
of
laid
-up
drilling
units
and
support
vessels.
The
average
price
spread
b
etween
high
-
and
low-
sulphur
fuels
is
projected
to
remain
narrow
in
the
near
term,
negatively
impacting
the
scrubber
investment
case
for
both
the
existing
fleet
and
newbuilds.
At
the
same
time,
the
low
oil
price
is
widening
the
price
differential
between
existing
fuels
and
green
alternatives.
This
,
combined
with
the
market
challenges
shipowners
are
facing
,
further
raises
the
importance
of
a
clear
and
foreseeable
development
of
the
regulatory
environment
as
a
fundamental
condition
to
the
decarbonisation
of
shipping.
In
the
e
nergy
markets,
the
slowdown
in
economic
activity,
currency
fluctuations,
and
potential
financing
constraints
are
likely
to
postpone
investment
decisions
on
new
power
generation
capacity.
The
energy
transition
may
temporarily
slow
down,
as
the
focus
is
on
containing
the
virus
spread
and
mitigating
its
impacts.
Agreed
and
proposed
stimulus
packages
to
accelerate
renewable
energy
investments
still
include
uncertainties
about
the
allocation
of
funding.
However,
once
stimulus
measures
are
execut
ed,
the
need
for
flexibility
in
power
systems
will
be
emphasi
s
ed.
Changes
in
c
limate
polic
ies
and
regulation
s
cause
uncertainty
in
the
markets
,
as
they
may
impact
customers’
technology
choices.
Geopolitical
tensions
and
trade
barrier
implications
are
also
notable
challenges
to
the
demand
environment.
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pressure
resulting
from
the
prevailing
competitive
environment
remains
a
risk.
The
Group
is
a
defendant
in
a
number
of
legal
cases
that
have
arisen
out
of,
or
are
incidental
to,
the
ordinary
course
of
its
business.
These
lawsuits
mainly
concern
issues
such
as
contractual
and
other
liability,
labour
relations,
property
damage,
and
regulatory
matters.
From
time
to
time,
the
Group
receives
claims
of
different
amounts
and
with
varying
degrees
of
substantiation.
There
is
currently
one
unusually
sizeable
claim.
It
is
the
Group’s
policy
to
provide
for
amounts
related
to
the
claims
as
well
as
for
litigation
and
arbitration
matters
when
an
unfavourable
outcome
is
probable
and
the
amount
of
loss
can
be
reasonably
estimated.
The
Risks
and
risk
management
section
of
the
annual
report
contains
a
more
detailed
description
of
Wärtsilä’s
risks
and
risk
management.
Shares
and
shareholders
In
2020
,
the
number
of
shares
traded
on
Nasdaq
Helsinki
was
635,449,872
,
equivalent
to
a
turnover
of
EUR
4,865
million.
Wärtsilä's
shares
are
also
traded
on
alternative
exchanges,
such
as
Turquoise,
BATS
CXE,
and
BATS
BXE.
The
total
trading
volume
on
these
alternative
exchanges
was
199,394,959
shares.
Wärtsilä
shares
on
Nasdaq
Helsinki
31.12.2020
Number
of
shares
and
votes
Number
of
shares
traded
1-12/2020
WRT1V
591,723,390
635,449,872
1.1.-
31.12.2020
High
Low
Average*
Close
Share
price
12.00
5.01
7.66
8.15
*Trade
-weighted
average
price
Market
capitalisation
31.12.2020
31.12.2019
MEUR
4,823
5,828
Foreign
shareholders
31.12.2020
31.12.2019
%
50.7
52.8
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Decisions
taken
by
the
Annual
General
Meeting
Wärtsilä’s
Annual
General
Meeting,
held
on
5
March
2020,
approved
the
financial
statements
and
discharged
the
members
of
the
Board
of
Directors
and
the
company’s
President
&
CEO
from
liability
for
the
financial
year
2019.
The
Annual
General
Meeting
decided
that
the
Board
of
Directors
shall
have
eight
members.
The
following
were
elected
to
the
Board:
Maarit
Aarni
-Sirviö,
Karen
Bomba,
Karin
Falk,
Johan
Forssell,
Tom
Johnstone,
Risto
Murto,
Mats
Rahmström
and
Markus
Rauramo.
The
audit
firm
PricewaterhouseCoopers
Oy
was
elected
as
the
company’s
auditor
for
the
year
2020.
Dividend
distribution
The
Annual
General
Meeting
approved
the
Board
of
Directors’
proposal
to
pay
a
dividend
of
EUR
0.48
per
share
in
two
instalments.
The
first
instalment
of
EUR
0.24
per
share
was
paid
on
16
March
2020
and
the
second
instalment
of
EUR
0.24
per
share
on
17
September
2020.
Shareholders’
Nomination
Board
The
Annual
General
Meeting
decided
to
establish
a
Shareholders’
Nomination
Board
to
prepare
matters
pertaining
to
the
appointment
and
remuneration
of
the
Board
of
Directors.
It
also
adopted
the
proposed
Charter
of
the
Shareholders’
Nomination
Board.
The
Charter
is
available
on
Wärtsilä
Corporation’s
website.
The
Nomination
Board
consists
of
five
members.
Four
representatives
are
nominated
by
the
company’s
four
largest
shareholders,
with
the
fifth
member
being
the
Chairman
of
Wärtsilä’s
Board
of
Directors.
The
four
largest
shareholders
are
determined
on
the
basis
of
the
shareholders’
register
maintained
by
Euroclear
Finland
Oy
as
of
1
June
preceding
the
Annual
General
Meeting
of
shareholders.
Flagging
notifications
Wärtsilä
was
informed
of
the
following
changes
in
ownership
during
2020
:
Transaction
date
Shareholder
Treshold
Direct
holding,
%
Total
holding,
%
24.3.2020
BlackRock,
Inc.
Above
5%
4.85
5.11
31.3.2020
BlackRock,
Inc.
Below
5%
4.30
4.82
1.4.2020
BlackRock,
Inc.
Above
5%
4.48
5.00
2.4.2020
BlackRock,
Inc.
Below
5%
4.37
4.94
25.5.2020
BlackRock,
Inc.
Above
5%
4.48
5.00
26.5.2020
BlackRock,
Inc.
Below
5%
Below
5%
Below
5%
18.6.2020
BlackRock,
Inc.
Above
5%
4.69
5.13
15.7.2020
BlackRock,
Inc.
Above
5%
5.02
5.80
23.7.2020
BlackRock,
Inc.
Below
5%
4.88
5.33
24.7.2020
BlackRock,
Inc.
Above
5%
5.12
5.54
27.7.2020
BlackRock,
Inc.
Below
5%
4.98
5.44
28.7.2020
BlackRock,
Inc.
Above
5%
5.01
5.47
29.7.2020
BlackRock,
Inc.
Below
5%
4.95
5.40
31.7.2020
BlackRock,
Inc.
Above
5%
5.04
5.48
5.8.2020
BlackRock,
Inc.
Below
5%
4.99
5.43
6.8.2020
BlackRock,
Inc.
Above
5%
5.08
5.47
11.8.2020
BlackRock,
Inc.
Below
5%
4.96
5.31
11.9.2020
BlackRock,
Inc.
Above
5%
5.03
5.58
18.9.2020
BlackRock,
Inc.
Below
5%
4.78
5.57
21.10.2020
BlackRock,
Inc.
Below
5%
Below
5%
Below
5%
14.12.2020
BlackRock,
Inc.
Above
5%
4.89
5.00
15.12.2020
BlackRock,
Inc.
Below
5%
Below
5%
Below
5%
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0,30
0,33
0,35
0,38
0,40
0,43
0,46
0,48
0,48
0,20
0,00
0,25
0,50
0,75
1,00
11
12
13
14
15
16
17
18
19
20
EUR
Dividend
per
share
Earnings
per
share
The
following
members
were
appointed
to
Wärtsilä’s
Shareholders’
Nomination
Board:
●
Petra
Hedengran
(General
Counsel,
Investor
AB),
appointed
by
Invaw
Invest
AB
●
Reima
Rytsölä
(Deputy
CEO,
Investments,
Varma
Mutual
Pension
Insurance
Company),
appointed
by
Varma
Mutual
Pension
Insurance
Company
●
Mikko
Mursula
(Deputy
CEO,
Chief
Investment
Officer,
Ilmarinen
Mutual
Pension
Insurance
Company),
appointed
by
Ilmarinen
Mutual
Pension
Insurance
Company
●
Satu
Huber
(CEO,
Elo
Mutual
Pension
Insurance
Company),
appointed
by
Elo
Mutual
Pension
Insurance
Company
●
Tom
Johnstone
(Chairman
of
the
Board
of
Directors
of
Wärtsilä)
Authorisation
to
repurchase
the
company’s
own
shares
The
Board
of
Directors
was
authorised
to
resolve
to
repurchase
a
maximum
of
57,000,000
of
the
company’s
own
shares.
The
authorisation
to
repurchase
the
company’s
own
shares
shall
be
valid
until
the
close
of
the
next
Annual
General
Meeting,
however
no
longer
than
for
18
months
from
the
authorisation
of
the
shareholders’
meeting.
Authorisation
to
issue
shares
The
Board
of
Directors
was
authorised
to
resolve
to
issue
new
shares
or
transfer
shares
held
by
the
company.
The
maximum
amount
of
shares
to
be
so
issued
shall
not
exceed
57,000,000.
The
shares
can
be
issued
for
consideration
or
without
consideration.
They
can
also
be
issued
in
deviation
from
the
shareholders’
pre
-emptive
rights
by
way
of
a
directed
issue
if
there
is
a
weighty
financial
reason
for
the
company
to
do
so.
The
authorisation
for
the
Board
of
Directors
to
issue
shares
shall
be
valid
for
three
years
from
the
authorisation
of
the
shareholders’
meeting
and
it
cancels
the
authorisation
given
by
the
General
Meeting
on
7
March
2019
to
distribute
the
company’s
own
shar
es.
Organisation
of
the
Board
of
Directors
Convening
after
the
Annual
General
Meeting,
the
Board
of
Directors
elected
Tom
Johnstone
as
its
chairman
and
Markus
Rauramo
as
the
deputy
chairman.
The
Board
decided
to
establish
an
Audit
Committee
and
a
People
Committee.
The
Board
appointed
from
among
its
members
the
following
members
to
the
Committees:
Audit
Committee:
Chair
Markus
Rauramo,
Maarit
Aarni-
Sirviö,
Risto
Murto
People
Committee:
Chair
Maarit
Aarni
-Sirviö,
Johan
Forssell,
Tom
Johnstone
WÄRTSILÄ'S
PROSPECTS
FOR
2021
Wärtsilä
expects
the
near
-
term
demand
environment
to
be
similar
to
that
of
the
corresponding
period
in
the
previous
year.
However,
visibility
remains
limited,
and
the
prevailing
market
conditions
make
the
outlook
uncertain.
BOARD
OF
DIRECTORS’
DIVIDEND
PROPOSAL
The
Board
of
Directors
proposes
that
a
dividend
of
EUR
0.20
per
share
be
paid
for
the
financial
year
2020.
The
parent
company’s
distributable
funds
total
EUR
974,008,736.28,
which
includes
EUR
264,838,387.72
in
net
profit
for
the
year.
There
are
591,723,390
shares
with
dividend
rights.
The
dividend
shall
be
paid
in
two
instalments.
The
first
instalme
nt
of
EUR
0.10
per
share
shall
be
paid
to
the
shareholders
who
are
registered
in
the
list
of
shareholders
maintained
by
Euroclear
Finland
Oy
on
the
dividend
record
date
of
8
March
2021.
The
payment
day
proposed
by
the
Board
for
this
instalment
is
15
March
2021.
The
second
instalment
of
EUR
0.10
per
share
shall
be
paid
in
September
202
1.
The
second
instalment
of
the
dividend
shall
be
paid
to
shareholders
who
are
registered
in
the
list
of
shareholders
maintained
by
Euroclear
Finland
Oy
on
the
dividend
record
day,
which,
together
with
the
payment
day,
shall
be
decided
by
the
Board
of
Directors
in
its
meeting
scheduled
for
9
September
202
1.
The
dividend
record
day
for
the
second
instalment
as
per
the
current
rules
of
the
Finnish
book
-entry
system
would
be
13
September
2021
and
the
dividend
payment
day
20
September
202
1
.
EVENTS
AFTER
THE
REVIEW
PERIOD
In
January
2021,
Wärtsilä
announced
the
divestment
of
100%
of
the
shares
in
its
Entertainment
business,
Wärtsilä
Funa
GmbH,
to
Videlio
SA,
a
French
public
limited
company.
Wärtsilä
Entertainment
is
engaged
in
the
field
of
design,
fabrication,
engineering
and
integration
of
entertainment
systems,
illumination,
light
control,
cabin
control,
broadcast
Dividend
The
free
share
issue
approved
by
Wärtsilä
Corporation’s
Annual
General
Meeting
on
8
March
2018
increased
the
total
number
of
Wärtsilä
shares
to
591,723,390.
Figures
for
the
comparison
periods
201
1-2017
have
been
adjusted
to
reflect
the
increased
number
of
shares.
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and
digital
audio
distribution
and
announcement
systems
for
cruise
vessels
and
entertainment
parks.
The
company
became
p
art
of
Wärtsilä
as
a
result
of
the
acquisition
of
L
-3
Communications
MSI
in
2015
and
has
172
employees
in
five
countries,
with
the
majority
being
based
in
Emden,
Germany.
The
annual
revenues
were
approximately
EUR
50
million
in
2020.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
FIVE
YEARS
IN
FIGURES
Wärtsilä
provides
certain
financial
performance
measures,
which
are
accounting
measures
that
are
not
defined
by
IFRS.
These
alternative
performance
measures,
such
as
comparable
operating
result,
comparable
adjusted
EBITA,
cash
flow
from
operating
activities,
and
gearing,
are
followed
and
used
by
management
to
measure
the
Group's
performance
and
financial
position.
In
addition,
Wärtsilä's
targets
of
financial
performance
are
linked
to
for
example
comparable
operating
result
and
gearing.
Thus,
these
alternative
performance
measures
provide
useful
information
to
the
capital
markets.
The
alternative
performance
measures
should
not
be
evaluated
in
isolation
from
the
corresponding
IFRS
measures.
The
alternative
performance
measure
calculation
definitions
are
disclosed
in
Calculations
of
financial
ratios.
Restated
MEUR
2020
2019
2018
2017*
2016
Net
sales
4,604
5,170
5,174
4,911
4,801
of
which
outside
Finland
%
97.9
98.5
98.9
97.7
97.5
Exports
from
Finland
1,702
1,933
2,145
1,953
1,804
Personnel
on
average
18,307
19,110
18,899
17,866
18,332
of
which
in
Finland
3,706
3,868
3,766
3,521
3,482
Order
book
5,057
5,878
6,166
5,100
4,696
From
the
consolidated
statement
of
income
Depreciation,
amortisation
and
impairment
174
180
130
134
138
Share
of
result
of
associates
and
joint
ventures
3
-9
13
13
14
Comparable
operating
result
275
457
577
576
583
as
a
percentage
of
net
sales
%
6.0
8.8
11.2
11.7
12.1
Operating
result
234
362
543
538
532
as
a
percentage
of
net
sales
%
5.1
7.0
10.5
11.0
11.1
Comparable
adjusted
EBITA
308
498
621
612
618
as
a
percentage
of
net
sales
%
6.7
9.6
12.0
12.5
12.9
Financial
income
and
expenses
-43
-47
-40
-47
-53
Profit
before
taxes
191
315
502
491
479
as
a
percentage
of
net
sales
%
4.2
6.1
9.7
10.0
10.0
Profit
for
the
financial
period
133
218
386
375
357
as
a
percentage
of
net
sales
%
2.9
4.2
7.5
7.6
7.4
From
the
consolidated
statement
of
financial
position
Non
-current
assets
2,427
2,518
2,369
2,285
2,116
Current
assets
3,706
3,797
3,690
3,363
3,275
Assets
held
for
sale
99
82
-
-
-
Total
equity
attributable
to
equity
holders
of
the
parent
company
2,177
2,396
2,418
2,352
2,288
Non
-controlling
interests
11
14
14
24
34
Interest
-bearing
debt
1,327
1,096
823
619
629
Non
-interest
-bearing
liabilities
2,648
2,824
2,804
2,653
2,441
Liabilities
directly
attributable
to
assets
held
for
sale
68
68
-
-
-
Total
equity
and
liabilities
6,232
6,398
6,059
5,648
5,391
From
the
consolidated
statement
of
cash
flows
Cash
flow
from
operating
activities
681
232
470
430
613
Cash
flow
from
investing
activities
-55
-95
-240
-235
-126
Cash
flow
from
financing
activities
-44
-256
-118
-278
-339
Gross
capital
expenditure
117
122
306
255
146
as
a
percentage
of
net
sales
%
2.5
2.4
5.9
5.2
3.0
Research
and
development
expenditure
153
164
165
141
131
as
a
percentage
of
net
sales
%
3.3
3.2
3.2
2.9
2.7
Dividends
paid
118**
284
284
272
256
Financial
ratios
Earnings
per
share
(EPS),
basic
and
diluted***
EUR
0.23
0.37
0.65
0.63
0.60
Dividend
per
share***
EUR
0.20**
0.48
0.48
0.46
0.43
Dividend
per
earnings
%
88.2**
130.8
73.7
70.8
72.8
Interest
coverage
7.1
7.7
10.8
11.8
18.6
Return
on
investment
(ROI)
%
7.1
11.5
18.1
18.5
17.1
Return
on
equity
(ROE)
%
5.8
9.0
16.1
16.0
15.6
Solvency
ratio
%
38.1
40.8
44.4
46.3
47.6
Gearing
0.18
0.30
0.14
0.10
0.07
Equity
per
share***
EUR
3.68
4.05
4.09
3.97
3.87
Working
capital
(WCAP)
EUR
257
732
581
563
490
The
financial
ratios
include
assets
and
liabilities
pertaining
to
assets
held
for
sale.
*
Figures
in
the
comparison
period
2017
have
been
restated
due
to
the
adoption
of
IFRS
15.
**
Proposal
of
the
Board
of
Directors.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
***
Share
issue
without
payment
(share
split)
approved
by
Wärtsilä
Corporation’s
Annual
General
Meeting
on
8
March
2018
increased
the
total
number
of
Wärtsilä
shares
to
591,723,390.
Figures
in
the
comparison
periods
have
been
restated
accordingly.
QUARTERLY
FIGURES
MEUR
10–12/2020
7–9/2020
4–6/2020
1–3/2020
10–12/2019
7–9/2019
4–6/2019
1–3/2019
10–12/2018
Order
intake
Marine
Power*
440
410
391
496
656
449
632
509
Marine
Systems*
133
174
119
113
147
150
198
258
Voyage*
55
44
56
107
93
69
72
76
Wärtsilä
Marine
Business*
1,031
Energy*
469
319
390
475
585
260
435
489
843
Portfolio
Business*
21
34
55
57
74
51
40
83
Total
1,118
981
1,011
1,247
1,555
979
1,377
1,416
1,874
Order
book
at
the
end
of
the
financial
period**
Marine
Power*
1,839
1,908
1,913
1,967
2,019
1,981
1,976
1,800
Marine
Systems*
857
872
902
1,051
1,232
1,377
1,471
1,516
Voyage*
275
289
305
304
274
265
252
257
Wärtsilä
Marine
Business*
3,651
Energy*
1,830
1,865
1,939
2,087
2,014
2,023
2,120
2,043
2,515
Portfolio
Business*
257
331
341
336
338
336
338
361
Total
5,057
5,265
5,401
5,745
5,878
5,982
6,157
5,977
6,166
Net
sales
Marine
Power*
489
382
420
457
603
430
447
443
Marine
Systems*
167
169
238
234
279
244
237
192
Voyage*
68
54
56
69
82
60
73
65
Wärtsilä
Marine
Business*
831
Energy*
465
347
457
351
648
328
400
403
701
Portfolio
Business*
30
43
48
59
71
56
60
49
Total
1,220
995
1,220
1,170
1,684
1,118
1,217
1,151
1,532
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Wärtsilä
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Sustainability
/
Governance
/
Financial
review
Share
of
result
of
associates
and
joint
ventures
0
1
1
-2
-6
-1
3
Comparable
adjusted
EBITA
111
69
63
65
213
49
123
113
237
as
a
percentage
of
net
sales
9.1
7.0
5.2
5.6
12.6
4.4
10.1
9.8
15.4
Depreciation,
amortisation
and
impairment
-49
-47
-38
-39
-39
-58
-42
-41
-37
Purchase
price
allocation
amortisation
-8
-8
-8
-9
-10
-10
-10
-11
-11
Comparable
operating
result
103
61
55
56
202
39
113
102
226
as
a
percentage
of
net
sales
8.4
6.1
4.5
4.8
12.0
3.5
9.3
8.9
14.7
Items
affecting
comparability,
total
-13
-18
-6
-4
-39
-28
-17
-11
-20
Operating
result
90
43
49
52
164
11
96
91
206
as
a
percentage
of
net
sales
7.4
4.3
4.0
4.5
9.7
1.0
7.9
7.9
13.4
Financial
income
and
expenses
-12
-9
-13
-9
-11
-11
-13
-13
-12
Profit
before
taxes
78
34
36
43
153
83
78
194
Income
taxes
-23
-9
-12
-14
-51
-5
-21
-19
-41
Profit
for
the
financial
period
55
25
23
29
102
-5
62
59
153
Earnings
per
share
(EPS),
basic
and
diluted,
EUR
0.10
0.04
0.04
0.05
0.17
-0.01
0.11
0.10
0.25
Gross
capital
expenditure
38
25
27
27
44
24
32
23
48
Investments
in
securities
and
acquisitions
1
1
2
4
-1
Cash
flow
from
operating
activities
274
114
252
42
295
-61
-37
35
349
Working
capital
(WCAP)
at
the
end
of
the
financial
period
257
431
492
660
732
870
784
656
581
Personnel
at
the
end
of
the
financial
period***
Marine
Power*
8,355
8,412
8,674
8,934
8,820
8,962
9,005
8,881
Marine
Systems*
1,897
1,891
1,846
1,862
1,870
1,828
1,887
1,882
Voyage*
1,915
1,946
1,917
1,939
1,889
1,875
1,849
1,852
Wärtsilä
Marine
Business*
13,582
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/
Sustainability
/
Governance
/
Financial
review
Energy*
4,888
4,837
4,799
4,819
5,137
5,295
5,449
5,513
5,712
Portfolio
Business*
737
1,097
1,098
1,088
1,080
1,058
1,050
1,096
Total
17,792
18,183
18,334
18,642
18,795
19,018
19,239
19,225
19,294
*
The
segment
related
comparison
figures
for
2018
have
been
restated
to
reflect
the
organisational
structure,
which
was
in
place
during
2019.
The
segment
related
comparison
figures
for
2019
and
1
-3/2020
have
been
restated
to
reflect
the
new
organisational
structure
effective
as
of
1
July
2020.
**
During
2019,
Wärtsilä
implemented
stricter
requirements
for
the
booking
of
new
orders,
which
resulted
in
certain
projects
being
removed
from
the
Energy
business’
order
book.
The
order
book
for
the
first
three
quarters
of
2019
has
been
adjusted
to
reflect
this
change.
***
Comparison
figures
have
been
adjusted
to
reflect
the
business
unit
composition
of
the
Portfolio
Business
and
a
change
in
allocation
principles.
CALCULATIONS
OF
FINANCIAL
RATIOS
Operating
result
Net
sales
+
other
operating
income
–
expenses
–
depreciation,
amortisation
and
impairment
+/
–
share
of
result
of
associates
and
joint
ventures
Earnings
per
share
(EPS),
basic
and
diluted
Profit
for
the
financial
period
attributable
to
equity
holders
of
the
parent
company
Adjusted
number
of
shares,
average
over
the
financial
period
Items
affecting
comparability
Certain
income
and
expenses
are
presented
as
items
affecting
comparability
when
they
have
significant
impact
on
the
consolidated
statement
of
income.
Items
affecting
comparability
consist
of
income
and
expenses,
which
result
from
restructuring
activities
aiming
to
adjust
the
capacity
of
Wärtsilä’s
operations.
They
may
also
include
other
income
and
expenses
incurred
outside
Wärtsilä’s
normal
course
of
business,
such
as
impairment
charges,
acquisition
related
costs,
settlements
recorded
as
a
result
of
legal
proceedings
with
third
parties
or
unforeseen
obligations
from
earlier
discontinued
businesses.
Comparable
operating
result
Operating
result
–
items
affecting
comparability
Comparable
adjusted
EBITA
Operating
result
–
items
affecting
comparability
–
purchase
price
allocation
amortisation
Gross
capital
expenditure
Investments
in
securities
and
acquisitions
+
investments
in
intangible
assets
and
property,
plant
and
equipment
Net
interest
-bearing
debt
Total
of
non-current
and
current
interest-bearing
debt
+
total
of
non-current
and
current
lease
liabilities
–
interest-bearing
receivables
–
cash
and
cash
equivalents
Equity
per
share
Equity
attributable
to
equity
holders
of
the
parent
company
Adjusted
number
of
shares
at
the
end
of
the
financial
period
Solvency
ratio
Equity
x
100
Total
equity
and
liabilities
–
advances
received
Gearing
Interest
-bearing
liabilities
–
cash
and
cash
equivalents
Equity
Return
on
investment
(ROI)
Profit
before
taxes
+
interest
and
other
financial
expenses
x
100
Total
equity
and
liabilities
–
non-interest
-bearing
liabilities
–
provisions,
average
over
financial
period
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Return
on
equity
(ROE)
Profit
for
the
financial
period
x
100
Equity,
average
over
the
financial
period
Order
intake
Total
amount
of
orders
received
during
the
financial
period
to
be
delivered
either
during
the
current
financial
period
or
thereafter.
Order
book
The
presentation
in
value
of
orders
that
are
placed
by
customers
but
not
yet
delivered.
For
service
agreements,
only
the
expected
net
sales
for
the
next
24
months
are
included
in
the
order
book.
Working
capital
(WCAP)
(Inventories
+
trade
receivables
+
current
tax
receivables
+
other
non
-interest
-be
aring
receivables)
–
(trade
payables
+
advances
received
+
pension
obligations
+
provisions
+
current
tax
liabilities
+
other
non-
interest
-bearing
liabilities
–
dividend
payable)
Interest
coverage
Profit
before
taxes
+
depreciation,
amortisation
and
impai
rment
+
interest
and
other
financial
expenses
Interest
and
other
financial
expenses
Dividend
per
share
Dividends
paid
for
the
financial
period
Adjusted
number
of
shares
at
the
end
of
the
financial
period
Dividend
per
earnings
Dividend
per
share
x
100
Earnings
per
share
(EPS),
basic
and
diluted
Effective
dividend
yield
Dividend
per
share
x
100
Adjusted
share
price
at
the
end
of
the
financial
period
Price/earnings
(P/E)
Adjusted
share
price
at
the
end
of
the
financial
period
Earnings
per
share
(EPS),
basic
and
diluted
Price/carrying
amount
per
share
(P/BV)
Adjusted
share
price
at
the
end
of
the
financial
period
Equity
per
share
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FINANCIAL
STATEMENTS
CONSOLIDATED
FINANCIAL
STATEMENTS
CONSOLIDATED
STATEMENT
OF
INCOME
MEUR
2020
2019
Note
Net
sales
4,604
5,170
2.1.,
2.2.
Change
in
inventories
of
finished
goods
&
work
in
progress
-104
137
Work
performed
by
the
Group
and
capitalised
19
18
Other
operating
income
61
67
2.3.
Material
and
services
-2,551
-3,003
2.4.
Employee
benefit
expenses
-1,192
-1,260
2.5.
Result
from
net
position
hedges
-1
Depreciation,
amortisation
and
impairment
-174
-180
3.5.
Other
operating
expenses
-431
-578
2.3.
Share
of
result
of
associates
and
joint
ventures
3
-9
6.4.
Operating
result
234
362
as
a
percentage
of
net
sales
5.1
7.0
Financial
income
16
27
5.1.
Financial
expenses
-59
-74
5.1.
Profit
before
taxes
191
315
Income
taxes
-58
-97
2.6.
Profit
for
the
financial
period
133
218
Attributable
to:
equity
holders
of
the
parent
company
134
217
2.7.
non-controlling
interests
-1
1
133
218
Earnings
per
share
attributable
to
equity
holders
of
the
parent
company
(basic
and
diluted):
Earnings
per
share
(EPS),
basic
and
diluted,
EUR
0.23
0.37
2.7.
The
notes
are
an
integral
part
of
these
consolidated
financial
statements.
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CONSOLIDATED
STATEMENT
OF
COMPREHENSIVE
INCOME
MEUR
2020
2019
Note
Profit
for
the
financial
period
133
218
Other
comprehensive
income,
net
of
taxes:
Items
that
will
not
be
reclassified
to
the
statement
of
income
Remeasurements
of
defined
benefit
liabilities
6
-20
Tax
on
items
that
will
not
be
reclassified
to
the
statement
of
income
-1
5
Total
items
that
will
not
be
reclassified
to
the
statement
of
income
5
-16
Items
that
may
be
reclassified
subsequently
to
the
statement
of
income
Exchange
rate
differences
on
translating
foreign
operations
for
equity
holders
of
the
parent
company
-74
42
for
non-controlling
interests
-1
transferred
to
the
statement
of
income
-6
Associates
and
joint
ventures,
share
of
other
comprehensive
income
-2
-1
Cash
flow
hedges
measured
at
fair
value
-3
4
5.5.
transferred
to
the
statement
of
income
6
19
Tax
on
items
that
may
be
reclassified
to
the
statement
of
income
Cash
flow
hedges
transferred
to
the
statement
of
income
-1
-4
Total
items
that
may
be
reclassified
to
the
statement
of
income
-81
60
Other
comprehensive
income
for
the
financial
period,
net
of
taxes
-76
45
Total
comprehensive
income
for
the
financial
period
57
263
Total
comprehensive
income
attributable
to:
equity
holders
of
the
parent
company
59
262
non-controlling
interests
-1
1
57
263
The
notes
are
an
integral
part
of
these
consolidated
financial
statements.
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Financial
review
CONSOLIDATED
STATEMENT
OF
FINANCIAL
POSITION
MEUR
31.12.2020
31.12.2019
Note
Assets
Non
-current
assets
Goodwill
1,325
1,380
3.1.
Intangible
assets
391
397
3.2.
Property,
plant
and
equipment
282
307
3.3.
Right
-of
-use
assets
162
185
3.4.
Investments
in
associates
and
joint
ventures
23
42
6.4.
Other
investments
19
18
5.2.
Interest
-bearing
investments
1
1
5.2.
Deferred
tax
assets
183
155
4.6.
Trade
receivables
30
19
4.2.,
5.2.
Other
receivables
11
15
4.3.
Total
non
-current
assets
2,427
2,518
Current
assets
Inventories
1,192
1,365
4.1.
Trade
receivables
922
1,237
4.2.,
5.2.
Current
tax
receivables
27
42
Contract
assets
389
515
4.2.
Other
receivables
258
281
4.3.
Cash
and
cash
equivalents
919
358
5.3.,
5.4.
Total
current
assets
3,706
3,797
Assets
held
for
sale
99
82
6.3.
Total
assets
6,232
6,398
Equity
and
liabilities
Equity
Share
capital
336
336
5.5.
Share
premium
61
61
5.5.
Translation
differences
-197
-114
5.5.
Fair
value
reserve
-9
-11
5.5.
Remeasurements
of
defined
benefit
liabilities
-45
-55
4.7.
Retained
earnings
2,030
2,178
Total
equity
attributable
to
equity
holders
of
the
parent
company
2,177
2,396
Non
-controlling
interests
11
14
Total
equity
2,188
2,410
Liabilities
Non
-current
liabilities
Interest
-bearing
debt
1,129
997
5.2.,
5.4.,
5.6.
Deferred
tax
liabilities
76
83
4.6.
Pension
obligations
139
155
4.7.
Provisions
55
45
4.5.
Contract
liabilities
51
38
4.2.
Other
liabilities
1
1
3.4.,
4.4.
Total
non
-current
liabilities
1,451
1,317
Current
liabilities
Interest
-bearing
debt
198
99
5.2.,
5.4.,
5.6.
Provisions
269
278
4.5.
Trade
payables
411
624
4.4.,
5.2.,
5.6.
Current
tax
liabilities
56
100
Contract
liabilities
926
880
4.2.
Other
liabilities
664
622
3.4.,
4.4.
Total
current
liabilities
2,524
2,603
Total
liabilities
3,975
3,920
Liabilities
directly
attributable
to
assets
held
for
sale
68
68
6.3.
Total
equity
and
liabilities
6,232
6,398
The
notes
are
an
integral
part
of
these
consolidated
financial
statements.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
CONSOLIDATED
STATEMENT
OF
CASH
FLOWS
MEUR
2020
2019
Note
Cash
flow
from
operating
activities:
Profit
for
the
financial
period
133
218
Adjustments
for:
Depreciation,
amortisation
and
impairment
174
180
3.5.
Financial
income
and
expenses
43
47
5.1.
Gains
and
losses
on
sale
of
intangible
assets
and
property,
plant
and
equipment
and
other
changes
-9
-15
Share
of
result
of
associates
and
joint
ventures
-3
9
6.4.
Income
taxes
58
97
2.6.
Other
non-cash
flow
adjustments
7
3
Cash
flow
before
changes
in
working
capital
403
540
Changes
in
working
capital:
Receivables,
non-interest
-bearing,
increase
(-)
/
decrease
(+)
338
9
Inventories,
increase
(-)
/
decrease
(+)
122
-213
4.1.
Liabilities,
non-interest
-bearing,
increase
(+)
/
decrease
(-)
-32
74
Changes
in
working
capital
428
-130
Cash
flow
from
operating
activities
before
financial
items
and
taxes
832
410
Financial
items
and
taxes:
Interest
income
4
4
Interest
expenses
-14
-13
Other
financial
income
and
expenses
-19
-27
Income
taxes
paid
-122
-141
Financial
items
and
paid
taxes
-150
-178
Cash
flow
from
operating
activities
681
232
Cash
flow
from
investing
activities:
Acquisitions
-1
-4
6.1.
Other
investments
-1
-2
5.2.
Investments
in
property,
plant
and
equipment
and
intangible
assets
-115
-116
3.2.,
3.3.
Proceeds
from
sale
of
property,
plant
and
equipment
and
intangible
assets
13
25
3.2.,
3.3.
Proceeds
from
sale
of
shares
in
subsidiaries
22
1
6.2.
Proceeds
from
sale
of
shares
in
associates
and
joint
ventures
27
6.4.
Cash
flow
from
investing
activities
-55
-95
Cash
flow
after
investing
activities
627
137
Cash
flow
from
financing
activities:
Proceeds
from
non-current
debt
317
150
Repayments
and
other
changes
in
non-current
debt
-76
-105
5.6.
Loan
receivables,
increase
(-)
/
decrease
(+)
1
2
Current
loans,
increase
(+)
/
decrease
(-)
0
-18
Dividends
paid
-286
-284
Cash
flow
from
financing
activities
-44
-256
Change
in
cash
and
cash
equivalents,
increase
(+)
/
decrease
(-)
582
-119
Cash
and
cash
equivalents
at
the
beginning
of
the
financial
period*
369
487
Exchange
rate
changes
-19
Cash
and
cash
equivalents
at
the
end
of
the
financial
period*
932
369
*
Cash
and
cash
equivalents
on
31
December
2020
and
31
December
2019
include
the
cash
and
cash
equivalents
pertaining
to
assets
held
for
sale.
The
notes
are
an
integral
part
of
these
consolidated
financial
statements.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
CONSOLIDATED
STATEMENT
OF
CHANGES
IN
EQUITY
Total
equity
attributable
to
equity
holders
of
the
parent
company
Non
-
controlling
interests
Total
equity
MEUR
Share
capital
Share
premium
Translation
difference
Fair
value
reserve
Remeas
-
urements
of
defined
benefit
liabilities
Retained
earnings
Total
Equity
on
1
January
2019
336
61
-155
-31
-39
2,245
2,418
14
2,432
Translation
differences
41
41
41
Cash
flow
hedges
net
change
in
fair
value,
net
of
taxes
4
4
4
transferred
to
the
statement
of
income,
net
of
taxes
16
16
16
Defined
benefit
plans
-16
-16
-16
Other
comprehensive
income
41
20
-16
45
45
Profit
for
the
financial
period
217
217
1
218
Total
comprehensive
income
for
the
financial
period
41
20
-16
217
262
1
263
Dividends
paid
-284
-284
-1
-285
Equity
on
31
December
2019
336
61
-114
-11
-55
2,178
2,396
14
2,410
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Total
equity
attributable
to
equity
holders
of
the
parent
company
Non
-
controlling
interests
Total
equity
MEUR
Share
capital
Share
premium
Translation
difference
Fair
value
reserve
Remeas
-
urements
of
defined
benefit
liabilities
Retained
earnings
Total
Equity
on
1
January
2020
336
61
-114
-11
-55
2,178
2,396
14
2,410
Translation
differences
-76
-76
-1
-77
Translation
differences,
transferred
to
statement
of
income
-6
-6
-6
Cash
flow
hedges
net
change
in
fair
value,
net
of
taxes
-3
-3
-3
transferred
to
the
statement
of
income,
net
of
taxes
5
5
5
Defined
benefit
plans
5
5
5
Other
changes
5
-5
Other
comprehensive
income
-82
2
10
-5
-75
-1
-76
Profit
for
the
financial
period
134
134
-1
133
Total
comprehensive
income
for
the
financial
period
-82
2
10
129
59
-1
57
Dividends
paid
-284
-284
-2
-286
Other
changes
7
7
7
Equity
on
31
December
2020
336
61
-197
-9
-45
2,030
2,177
11
2,188
Additional
information
on
share
capital,
share
premium,
translation
difference
and
fair
value
reserve
is
presented
in
Note
5.
5.
Equity.
The
notes
are
an
integral
part
of
these
consolidated
financial
statements.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
NOTES
TO
THE
CONSOLIDATED
FINANCIAL
STATEMENTS
1.
ACCOUNTING
PRINCIPLES
FOR
THE
CONSOLIDATED
FINANCIAL
STATEMENTS
1.1.
BASIC
INFORMATION
Wärtsilä Corporation
is
a
Finnish
listed company
organised
under
the
laws
of
Finland
and
domiciled
in
Helsinki
.
The
address
of
its
registered
office
is
Hiililaiturinkuja 2, 00180 Helsinki
.
Wärtsilä Corporation
is
the
ultimate
parent
company
in
the
Wärtsilä
Group.
Wärtsilä is a global leader in smart technologies and complete lifecycle solutions for the marine and energy
markets. By emphasising sustainable innovation, total efficiency and data analytics, Wärtsilä maximises the
environmental and economic performance of the vessels and power plants of its customers.
In
2020,
Wärtsilä
’s
net
sales
totalled
EUR
4.6
billion
with
approximately
18,000
employees.
The
company
has
operations
in
over
200
locations
in
more
than
70
countries
around
the
world.
Wärtsilä
is
listed
on
Nasdaq
Helsinki.
These
consolidated
financial
statements
were
authorised
for
release
by
the
Board
of
Directors
of
Wärtsilä
Corporation
on
27
January
2021,
after
which,
in
accordance
with
the
Finnish
Corporate
Act,
the
shareholders
have
a
right
to
approve
or
reject
the
financial
statements
in
the
Annual
General
Meeting.
The
Annual
General
Meeting
also
has
the
possibility
to
decide
upon
changes
to
the
financial
statements.
1.2.
BASIS
OF
PREPARATION
The
consolidated
financial
statements
are
prepared
in
accordance
with
the
International
Financial
Reporting
Standards
(IFRS)
by
applying
IAS
and
IFRS
standards
and
their
SIC
and
IFRIC
interpretations,
which
were
in
force
on
31
December
2020.
International
Financial
Reporting
Standards
refer
to
the
standards,
and
their
interpretations,
approved
for
application
in
the
EU
in
accordance
with
the
procedures
stipulated
in
the
EU’s
regulation
(EC)
No.
1606/2002
and
embodied
in
Finnish
accounting
legislation
and
the
statutes
enacted
under
it.
The
notes
to
the
consolidated
financial
statements
also
comply
with
the
Finnish
accounting
and
corporate
legislation.
All
intragroup
transactions,
dividend
distributions,
receivables
and
liabilities,
as
well
as
unrealised
margins,
are
eliminated
in
the
consolidated
financial
statements.
In
the
consolidated
statements
of
income
and
comprehensive
income,
non-controlling
interests
have
been
separated
from
the
profit
and
the
total
comprehensive
income
for
the
financial
period.
In
t
he
consolidated
statement
of
financial
position,
non-
controlling
interests
are
shown
as
a
separate
item
under
equity.
Reporting
is
based
on
the
historical
cost
convention.
Exceptions
are
the
financial
assets
and
liabilities
at
fair
value
through
the
statement
of
income,
the
assets
and
liabilities
arising
from
pension
plans,
hedged
items
under
fair
value
hedging,
the
cash
-
and
share
-settled
share
-based
payment
transactions
which
are
measured
at
fair
value,
and
assets
held
for
sale
which
are
measured
at
the
lower
of
the
carrying
amount
and
the
fair
value
less
costs
to
sell.
The
figures
are
in
millions
of
euros
except
Note
7.2.
Related
party
disclosures,
which
is
presented
in
thousands
of
euros.
1.3.
NEW
AND
AMENDED
IFRS
STANDARDS
In
2020,
the
Group
has
adopt
ed
the
following
amended
standards
issued
by
the
IASB.
Amendments
to
IFRS
3
Business
Combinations
(effective
for
financial
periods
beginning
on
or
after
1
January
2020).
The
amendments
are
intended
to
assist
entities
to
determine
whether
a
transaction
should
be
accounted
for
as
a
business
combination
or
as
an
asset
acquisition.
The
amendments
clarify
the
minimum
requirements
for
a
business,
remove
the
assessment
of
whether
market
participants
are
capable
of
replacing
any
missing
elements,
add
guidance
to
help
entities
assess
whether
an
acquired
process
is
substantive,
narrow
the
definitions
of
a
business
and
of
outputs,
and
introduce
an
optional
fair
value
concentration
test.
The
amendments
have
no
impact
on
the
consolidated
financial
statements.
Amendments
to
IAS
1
Presentation
of
Financial
Statements
and
IAS
8
Accounting
Policies,
Changes
in
Accounting
Estimates
and
Errors
(effective
for
financial
periods
beginning
on
or
after
1
January
2020).
The
purpose
of
the
amendments
is
to
align
the
definition
of
‘material’
across
the
standards
and
to
clarify
certain
aspects
of
the
definition.
The
amendments
clarify
that
materiality
will
depend
on
the
nature
or
magnitude
of
information,
or
both.
The
amendments
have
no
impact
on
the
consolidated
financial
statements.
Amendments
to
IFRS
9
Financial
Instruments,
IAS
39
Financial
Instruments:
Recognition
and
Measurement,
and
IFRS
7
Financial
Instruments:
Disclosures
(effective
for
financial
periods
beginning
on
or
after
1
January
2020).
These
amendments
provide
certain
reliefs
in
connection
with
interest
rate
benchmark
reform.
The
reliefs
relate
to
hedge
accounting
and
have
the
effect
that
IBOR
reform
should
not
generally
cause
hedge
accounting
to
terminate.
Any
hedge
ineffectiveness
should
continue
to
be
recognised
in
the
statement
of
income.
The
amendments
do
not
have
a
significant
impact
on
the
consolidated
financial
statements.
Amendment
to
IFRS
16
Leases
Covid
-19
-Related
Rent
Concessions
(effective
for
financial
periods
beginning
on
or
after
1
June
2020).
The
amendment
introduces
an
optional
practical
expedient
that
simplifies
how
a
lessee
accounts
for
rent
concessions
that
are
a
direct
consequence
of
the
COVID-19
pandemic.
A
lessee
that
applies
the
practical
expedient
is
not
required
to
assess
whether
eligible
rent
concessions
are
lease
modifications
when
the
criteria
presented
in
the
amendment
are
met.
The
amendment
does
not
have
a
significant
impact
on
the
consolidated
financial
statements.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
In
2021
or
later,
the
Group
will
adopt
the
following
new
or
amended
standar
ds
issued
by
the
IASB.
Amendments
to
IAS
1
Presentation
of
Financial
Statements*
(effective
for
financial
periods
beginning
on
or
after
1
January
2022).
The
amendments
clarify
that
liabilities
are
classified
as
either
current
or
non
-current,
depending
on
the
rights
that
exist
at
the
end
of
the
reporting
period.
Classification
is
unaffected
by
the
expectations
of
the
entity
or
events
after
the
reporting
date.
The
amendments
will
have
no
impact
on
the
consolidated
financial
statements.
Amendments
to
IAS
37:
Provisions,
Contingent
Liabilities
and
Contingent
Assets*
(effective
for
financial
periods
beginning
on
or
after
1
January
2022).
The
amendments
specify
which
costs
an
entity
needs
to
include
when
assessing
whether
a
contract
is
onerous
or
loss
-making.
The
amendments
are
intended
to
provide
clarity
and
help
to
ensure
consistent
application
of
the
standard.
The
amendments
apply
a
directly
related
cost
approach.
The
costs
that
relate
directly
to
a
contract
to
provide
goods
or
services
include
both
incremental
costs
and
an
allocation
of
costs
directly
related
to
contract
activities.
Judgement
will
be
required
in
determining
which
costs
are
directly
related
to
contract
activities.
The
amendments
are
not
expected
to
have
a
significant
impact
on
the
consolidated
financial
statements.
Amendments
to
IAS
16:
Property,
Plant
and
Equipment*
(effective
for
financial
periods
beginning
on
or
after
1
January
2022).
The
amendments
prohibit
entities
from
deducting
from
the
cost
of
an
item
of
property,
plant
and
equipment,
any
proceeds
of
the
sale
of
items
produced
while
bringing
that
asset
to
the
location
and
condition
necessary
for
it
to
be
capable
of
operating
in
the
manner
intended
by
the
management.
The
proceeds
from
selling
such
items
and
the
costs
of
producing
those
items
are
recognised
in
the
statement
of
income.
The
amendments
will
have
no
impact
on
the
consolidated
financial
statements.
IFRS
17
Insurance
Contracts*
(effective
for
financial
periods
beginning
on
or
after
1
January
2023).
IFRS
17
applies
to
all
types
of
insurance
contracts
(direct
insurance
and
re
-insurance)
regardless
of
the
type
of
entities
that
issue
them,
as
well
as
to
certain
guarantees
and
financial
instruments
with
discretionary
participation
features.
The
overall
objective
is
to
provide
a
consistent
accounting
model
for
insurance
contracts.
The
impact
is
under
review
within
the
Group.
*
Not
yet
endorsed
for
use
by
the
European
Union
as
of
31
December
2020
1.4.
MANAGEMENT
JUDGEMENT
AND
USE
OF
ESTIMATES
Preparation
of
the
financial
statements
in
accordance
with
the
IFRS
requires
management
to
make
judgements,
estimates
,
and
assumptions
that
affect
the
valuation
of
the
reported
assets
and
liabilities,
as
well
as
other
information,
such
as
contingent
assets
and
liabilities
and
the
recognition
of
income
and
expenses
in
the
statement
of
income.
Although
these
continuously
evaluated
judgements,
estimates
,
and
assumptions
are
based
on
management’s
past
experience
and
best
knowledge
of
current
events
and
actions
,
as
well
as
expectations
of
future
events,
actual
results
may
differ
from
the
estimates.
For
Wärtsilä,
the
most
significant
judgements,
estimates,
and
assumptions
made
by
the
management
relate
to
the
items
listed
below,
more
information
can
be
found
in
the
corresponding
note:
-
revenue
recognition,
especially
project
estimates
for
long
-
term
projects
and
agreements
(
N
ote
2.2.
Revenue
recognition),
-
uncertain
tax
positions
(Note
2.6.
Income
taxes),
-
impairment
testing
(
N
ote
3.1.
Goodwill),
-
estimating
useful
lives
and
assessing
indication
of
impairment
(
N
otes
3.2.
Other
intangible
assets
and
3.3.
Property,
plant
and
equi
pment)
,
-
determining
the
length
of
lease
terms
(Note
3.4.
Leases),
-
valuation
of
inventories
(Note
4.1.
Inventories),
-
valuation
of
trade
receivables
(
N
ote
4.2.
Trade
receivables
and
contract
assets
and
liabilities),
-
recognition
of
warranty
provisions
and
provisions
for
legal
cases
(
N
ote
4.5.
Provisions),
-
expected
results
on
tax
audits
and
deferred
tax
assets
from
tax
losses
(
N
ote
4.6.
Deferred
taxes)
,
and
-
defined
pension
benefit
obligations
(
Note
4.7.
Pension
obligations),
In
addition,
accounting
for
business
combinations
may
require
significant
management
judgement
(
Note
6.1.
Acquisitions).
The
COVID
-19
pandemic
has
caused
Wärtsilä
to
review
the
estimates
and
assumptions
used
in
the
preparation
of
the
consolidated
financial
statements.
The
possible
impact
of
the
situation
caused
by
the
coronavirus
pandemic
on
the
relevant
factors
in
each
estimate
have
been
considered.
The
impact
of
the
COVID-
19
pandemic
on
estimates
in
the
financial
reporting
rely
on
management’s
best
judgement.
This
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Wärtsilä
/
Sustainability
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Financial
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2.
GROUP
FINANCIAL
PERFORMANCE
2.1.
SEGMENT
INFORMATION
From
1
January
to
30
June
2020,
Wärtsilä
was
organised
into
three
business
areas:
Wärtsilä
Marine
Business,
Wärtsilä
Energy
Business,
and
Portfolio
Business.
Wärtsilä
Marine
Business
and
Wärtsilä
Energy
Business
constituted
Wärtsilä’s
operating
and
reportable
segments,
while
Portfolio
Business
was
reported
as
other
business
activities.
Wärtsilä’s
new
organisational
structure
became
operational
on
1
July
2020.
In
the
new
organisational
structure,
Wärtsilä
Marine
Power,
Wärtsilä
Marine
Systems,
Wärtsilä
Voyage,
and
Wärtsilä
Energy
constitute
the
reportable
segments
of
the
Group,
while
Wärtsilä
Portfolio
Business
continues
to
be
reported
as
other
business
activities.
The
segments
and
other
business
activities
cover
both
equipment
sales
and
services
for
the
respective
business.
Wärtsilä's
highest
operative
decision
maker
(CODM,
Chief
Operating
Decision
Maker)
is
the
President
and
CEO,
with
the
support
of
the
Board
of
Management,
and
in
some
cases
the
Board
of
Directors.
Marine
Power,
Marine
Systems,
Voyage,
Energy,
and
Portfolio
Business
are
each
led
by
their
President.
Discrete
financial
information
for
each
business
is
provided
to
the
CODM
to
support
decision
-making.
The
segment
information
presented
by
Wärtsilä
reflects
internal
management
reporting.
Segment
information
is
reported
to
the
level
of
operating
result,
as
items
below
operating
result
are
not
allocated
to
the
business
es.
Internal
sales
between
segments
and
other
business
activities
are
not
reported
in
management
reporting,
but
revenue
and
costs
of
sales
are
booked
directly
to
the
respective
customer
projects
and
orders.
The
main
factors
affecting
the
allocation
of
indirect
and
administration
costs
to
the
segments
and
other
business
activities
are
net
sales
and
the
number
of
personnel.
Management
considers
these
allocation
principles
to
be
the
most
suitable
means
for
reflecting
the
costs
carried
by
each
segment
and
other
business
activities.
The
allocation
principles
are
reviewed
regularly.
The
aim
of
Wärtsilä
is
to
lead
the
industry’s
transformation
towards
a
Smart
Marine
Ecosystem.
Building
on
the
sound
foundation
of
being
a
leading
provider
of
innovative
products,
integrated
solutions,
and
lifecycle
services
to
the
marine
and
oil
&
gas
industries,
Wärtsilä
aims
to
unlock
new
customer
values
through
connectivity,
digitalisation,
and
smart
technology.
Wärtsilä’s
marine
customer
base
covers
all
the
main
vessel
segments,
including
traditional
merchant
vessels,
gas
carriers,
cruise
&
ferry,
navy,
and
special
vessels.
In
the
oil
&
gas
industry,
Wärtsilä
is
active
in
serving
offshore
installations
and
related
industry
vessels,
as
well
as
land-based
gas
installations.
Wärtsilä’s
customers
comprise
ship
owners,
shipyards,
and
ship
management
companies.
Energy
leads
the
transition
towards
a
100%
renewable
energy
future.
Wärtsilä
helps
its
customers
unlock
the
value
of
the
energy
transition
by
optimising
their
energy
systems
and
future-proofing
their
assets.
Wärtsilä
Marine
Power
Marine
Power
focuses
on
Wärtsilä’s
comprehensive
range
of
engine
and
propulsion
solutions.
Its
offering,
which
includes
engines,
generating
sets,
gearboxes,
propulsion
equipment,
as
well
as
LNG
fuel
handling,
power
management,
and
NOx
reduction
technologies
,
positions
Marine
Power
as
a
leading
partner
for
its
customers
in
the
decarbonisation
of
the
maritime
industry,
particularly
through
fuel
flexibility
and
hybrid
solutions.
Marine
Power
has
six
business
units:
Power
Supply,
Propulsion,
Parts,
Performance,
Projects,
and
Field
Services
&
Workshops.
The
Marine
Power
setup
has
been
specifically
designed
to
support
its
customers
throughout
the
entire
lifecycle
of
their
vessels:
from
designing,
developing,
and
delivering
high
quality
products
and
solutions
that
ensure
superior
performance
and
that
are
capable
of
meeting
evolving
environmental
requirements,
to
assisting
customers
with
a
wide
service
network
supplying
spare
parts,
competent
field
service
personnel,
and
product
and
solution
upgrades,
as
well
as
reducing
operational
risk.
Wärtsilä
Marine
Systems
Marine
Systems
consists
of
four
end-to-
end
business
units:
Exhaust
Treatment,
Gas
Solutions,
Marine
Electrical
Systems,
and
Shaft
Line
Solutions.
Exhaust
Treatment
focuses
on
developing
the
exhaust
gas
cleaning
business.
Wärtsilä’s
exhaust
gas
cleaning
technology
is
an
economical
and
environmentally
friendly
solution
for
addressing
all
existing
and
anticipated
rules
and
regulations.
Wärtsilä
scrubber
systems
are
designed
to
provide
flexibility
and
reliable
operations
wherever
custom
ers
operate.
Gas
Solutions
is
the
leading
technology
and
service
provider
for
the
gas
value
chain,
with
a
broad
range
of
products
covering
cargo
handling
systems
for
gas
carriers,
liquefaction
and
gasification
systems
for
various
applications,
fuel
systems
for
alternative
engine
configurations
and
fuels,
and
renewable
gas
systems
with
solutions
for
biogas
upgrading
and
liquefaction.
Marine
Electrical
Systems
offers
comprehensive
electrical
turnkey
solutions
to
selected
niche
segments
,
such
as
navy
and
super
yachts,
assuming
responsibility
for
the
entire
project
from
basic
design
to
commissioning.
Shaft
Line
Solutions
(formerly
Seals
&
Bearings)
comprises
all
capabilities
required
to
provide
complete
integrated
shaft
line
solutions
from
its
global
factories
and
service
locations
to
customers
in
its
core
market
segments,
namely
navy,
merchant,
and
cruise.
This
is
Wärtsilä
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Sustainability
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Governance
/
Financial
review
Wärtsilä
Voyage
Voyage
helps
transform
the
way
vessels
perform
their
voyage
by
leveraging
the
latest
digital
technologies
to
deliver
a
step
-change
in
safety,
efficiency,
reliability,
and
emissions.
By
combining
bridge
systems,
cloud
data
management,
data
services,
decision
support
tools,
and
access
to
real-time
information,
Voyage
collaborates
in
creating
the
digital
ecosystem
of
the
future.
Voyage
has
one
of
the
largest
installed
bases
and
offerings
of
navigation,
automation,
simulation,
and
training
solutions,
and
ship
traffic
control
solutions.
Serving
the
key
market
segments
across
cruise,
ferry,
merchant,
navy,
and
non
-vessel
related
segments,
such
as
port
authorities
and
maritime
institutes,
Voyage
is
active
in
both
the
newbuild
and
existing
vessel
markets.
Voyage
executes
a
growth
strategy
based
on
innovative
product
development,
system
integration,
connectivity,
remote
operations,
and
cyber
security,
in
line
with
the
development
of
a
Smart
Marine
Ecosystem.
Wärtsilä
Energy
Wärtsilä’s
offering
comprises
flexible
power
plants,
energy
management
and
storage
systems,
as
well
as
lifecycle
services
that
enable
increased
efficiency
and
guaranteed
performance.
Wärtsilä’s
three
main
customer
segments
in
the
energy
markets
are
utilities,
independent
power
producers,
and
industrial
customers.
Wärtsilä’s
energy
solutions
are
used
for
a
wide
variety
of
applications.
These
include
baseload
generation,
capacity
for
grid
stability,
peaking
and
load
-following
generation,
and
for
the
integration
of
wind
and
solar
power.
Wärtsilä
provides
its
customers
with
a
comprehensive
understanding
of
energy
systems,
including
fully
integrated
assets
and
software,
complete
with
value
adding
lifecycle
services.
Wärtsilä
Portfolio
Business
Wärtsilä
reports
Portfolio
Business
as
other
business
activities.
Portfolio
Business
consists
of
multiple
business
units,
which
are
run
independently
with
the
aim
of
accelerating
performance
improvement
and
unlocking
value
through
divestments
or
other
strategic
alternatives.
The
business
units
included
in
Portfolio
Business
comprise
Entertainment
Systems,
Special
Products
covering
power
converter
products
and
UPS
systems,
Tank
Control
Systems,
Water
&
Waste,
as
well
as
American
Hydro,
the
hydropower
solutions
and
turbine
services
business
.
Until
30
September
2020,
Portfolio
Business
also
included
Wärtsilä
JOVYATLAS
GmbH
and
Wärtsilä
Valves
Ltd.
On
1
October,
Wärtsilä
divested
100%
of
the
shares
of
Wärtsilä
JOVYATLAS
and
100%
of
the
shares
of
Wärtsilä
Valves.
Portfolio
Business
also
included
Wärtsilä
ELAC
Nautik
GmbH
until
the
divestment
of
shares,
which
was
finalised
on
2
December
2020.
The
comparison
figures
for
the
segment
reporting
and
service
information
have
been
restated
to
reflect
the
new
reporting
structure.
MEUR
2020
2019
Net
sales
Marine
Power
1,748
1,923
Marine
Systems
808
952
Voyage
248
280
Energy
1,620
1,779
Portfolio
Business
181
236
Total
4,604
5,170
Depreciation,
amortisation
and
impairment
Marine
Power
-68
-88
Marine
Systems
-20
-23
Voyage
-27
-26
Energy
-32
-31
Portfolio
Business
-28
-11
Total
-174
-180
Share
of
result
of
associates
and
joint
ventures
Marine
Power
2
-9
Total
3
-9
Operating
result
Marine
Power
134
221
Marine
Systems
81
53
Voyage
-42
-37
Energy
91
131
Portfolio
Business
-29
-7
Total
234
362
Operating
result
as
a
percentage
of
net
sales
(%)
Marine
Power
7.7
11.5
Marine
Systems
10.0
5.6
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Voyage
-17.0
-13.3
Energy
5.6
7.4
Portfolio
Business
-16.2
-2.8
Total
5.1
7.0
Comparable
operating
result
Marine
Power
137
273
Marine
Systems
83
60
Voyage
-41
-31
Energy
101
155
Portfolio
Business
-6
Total
275
457
Comparable
operating
result
as
a
percentage
of
net
sales
(%)
Marine
Power
7.8
14.2
Marine
Systems
10.3
6.3
Voyage
-16.5
-11.2
Energy
6.3
8.7
Portfolio
Business
-3.1
0.1
Total
6.0
8.8
Alternative
performance
measures
Wärtsilä
provides
certain
financial
performance
measures,
which
are
not
defined
by
IFRS.
These
alternative
performance
measures
are
followed
and
used
by
management
to
measure
the
Group's
performance
and
financial
position,
and
also
provide
useful
information
to
the
capital
markets.
The
alternative
performance
measures
should
not
be
evaluated
in
isolation
from
the
corresponding
IFRS
measures.
The
alternative
performance
measure
calculation
definitions
are
disclosed
in
Calculations
of
financial
ratios.
Wärtsilä
discloses
certain
comparable
performance
measures
to
enhance
comparability
between
periods.
Certain
income
and
expenses
are
presented
as
items
affecting
comparability
when
they
have
significant
impact
on
the
consolidated
statement
of
income.
Items
affecting
comparability
consist
of
income
and
expenses,
which
result
from
restructuring
activities
aiming
to
adjust
the
capacity
of
Wärtsilä’s
operations.
They
may
also
include
other
income
and
expenses
incurred
outside
Wärtsilä’s
normal
course
of
business,
such
as
impairment
charges,
acquisition
related
costs,
settlements
recorded
as
a
result
of
legal
proceedings
with
third
parties,
or
unforeseen
obligations
from
earlier
discontinue
d
businesses.
The
reconciliation
of
the
comparable
operating
result
to
the
operating
result
is
presented
in
the
table
below.
Measures
of
profit
and
items
affecting
comparability
MEUR
2020
2019
Comparable
adjusted
EBITA
308
498
Purchase
price
allocation
amortisation
-33
-41
Comparable
operating
result
275
457
Items
affecting
comparability:
Social
plan
costs
-12
-31
Impairment
and
write
-downs
-22
-36
Profits
and
losses
from
disposals
6
Other
costs
-14
-27
Items
affecting
comparability,
total
-41
-95
Operating
result
234
362
Entity
wide
information
In
addition
to
segment
information,
Wärtsilä
reports
the
service
net
sales
for
all
segments
and
for
other
business
activities.
Wärtsilä
continues
to
report
information
for
the
geographical
areas
Finland,
other
Europe
an
countries,
Asia,
the
Americas,
and
other.
In
the
geographical
information
provided,
net
sales
are
split
by
customer
destination
and
non-current
assets
by
origin.
Non-current
assets
consi
st
of
goodwill,
intangible
assets,
property,
plant
and
equipment,
right-
of-use
assets,
and
investments
in
associates
and
joint
ventures.
Geographical
information
During
the
financial
period
1
January
-
31
December
2020
and
1
January
-
31
December
2019
Wärtsilä
did
not
have
any
individual
significant
customers
or
countries.
Of
the
total
net
sales,
sales
to
the
USA
represented
11%
(11)
and
sales
to
China
10%
(11).
This
is
Wärtsilä
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Sustainability
/
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/
Financial
review
MEUR
2020
2019
Net
sales
Finland
98
78
Other
European
countries
1,445
1,612
Asia
1,570
1,968
The
Americas
1,077
1,098
Other
415
414
Total
4,604
5,170
Non
-current
assets
Finland
329
324
Other
European
countries
1,515
1,595
Asia
97
114
The
Americas
235
271
Other
6
7
Total
2,183
2,310
Service
net
sales
MEUR
2020
2019
Net
sales
Marine
Power,
service
1,096
1,279
Marine
Systems,
service
219
202
Voyage,
service
85
103
Energy,
service
782
802
Portfolio
Business,
service
74
119
Total
2,255
2,505
2.2.
REVENUE
RECOGNITION
Accounting
principles
Revenue
is
presented
net
of
indirect
sales
taxes,
penalties
and
discounts.
Revenue
is
recognised
when
control
of
the
goods
or
services
is
transferred
to
the
customer
at
an
amount
that
reflects
the
consideration
to
which
the
Group
expects
to
be
entitled
in
exchange
for
those
goods
and
services.
The
transaction
price
may
include
variable
considerations,
such
as
penalties,
performance
bonuses
and
discounts.
Revenue
recognised
by
the
reporting
date
corresponds
to
the
benefit
of
the
service
provided
by
Wärtsilä
to
the
customer.
The
Group
recognises
revenue
when
it
satisfies
an
identified
performance
obligation
by
transferring
promised
goods
or
service
s
to
the
customer.
Goods
and
services
are
generally
considered
to
be
transferred
when
the
customer
obtains
control
of
them.
Such
control
is
transferred
either
at
a
point
in
time
or
over
time.
Revenue
from
contracts
with
customers
is
derived
from
four
revenue
types.
All
these
revenue
types
are
represented
within
all
reportable
segments
and
other
business
activities
:
Marine
Power,
Marine
Systems,
Voyage
,
Energy
and
Portfolio
Business.
Product
sales
consist
of
sales
of
spare
parts
and
standard
equipment
,
for
which
the
revenue
is
recognised
at
a
point
in
time
when
the
control
of
the
product
has
transferred
to
the
custom
er,
in
general
upon
delivery
of
the
goods.
Product
sale
contracts
generally
include
one
performance
obligation.
Goods
and
services
-type
of
revenue
involves
short-term
field
service
jobs,
including
the
delivery
of
a
combination
of
service
and
equipment.
The
revenue
is
recognised
at
a
point
in
time
when
the
service
is
rendered.
Goods
and
service
-type
contracts,
such
as
service
orders,
generally
include
one
performance
obligation.
Projects
are
of
both
short-
and
long-term
duration
.
Depending
on
the
contract
terms
and
the
duration
of
the
project,
the
revenue
is
recognised
at
a
point
in
time
or
over
time.
In
large-scale
system
or
equipment
deliveries
which
require
engineering,
for
example
power
plants
and
gas
solution
s
construction
contracts,
the
reven
ue
is
recognised
over
time
as
the
asset
produced
does
not
have
alternative
use
and
the
Group
has
an
enforceable
right
to
payment.
These
contracts
usually
contain
one
performance
obligation.
Revenue
from
tailor-made
equipment
delivery
projects
is
recognised
at
a
point
in
time
when
the
control
of
the
equipment
is
transferred,
in
general
upon
delivery.
These
contracts
generally
represent
one
performance
obligation,
but
under
certain
circumstances
they
can
contain
multiple
performance
obligations
when
a
contract
contains
multiple
units
of
delivery.
Revenue
from
service
related
projects
,
such
as
modernisation
and
upgrade
projects
is
recognised
over
time
because
the
customer
typically
controls
the
asset
that
is
enhanced.
Service
related
projects
usually
contain
one
performance
obligation.
Long-term
agreements
include
long-term
operating
and
maintenance
agreements
for
which
the
revenue
is
recognised
over
time
because
the
customer
simultaneously
receives
and
consumes
the
service
provided.
These
contracts
generally
c
ontain
one
performance
obligation
per
installation.
Contracts
with
customers
often
include
warranties
in
line
with
Wärtsilä’s
General
terms
and
conditions,
which
are
regarded
as
part
of
the
promise
to
the
customer.
Extended
warranties
or
warranties
purchased
as
an
option
are
identified
as
separate
performance
obligations
with
revenue
being
recognised
evenly
over
the
warranty
period.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Revenue
recognised
over
time
is
measured
in
accordance
with
the
input
method
(progress
measured
based
on
costs
incurred)
when
the
outcome
of
the
contract
can
be
estimated
reliably.
When
the
outcome
cannot
be
reliably
determined,
the
costs
arising
are
expensed
in
the
same
reporting
period
in
which
they
occur,
but
the
revenue
is
recorded
only
to
the
extent
that
the
company
will
receive
an
amount
corresponding
to
actual
costs.
Any
losses
are
expensed
immediately.
If
revenue
for
goods
and
services
is
recognised
at
a
point
in
time,
it
is
when
control
is
transferred
to
the
customer.
The
transfer
of
control
is
based
mainly
on
transferring
risks
and
rewards
according
to
the
delivery
terms.
Should
there
be
multiple
contracts
entered
into
with
the
same
client
at
near
the
same
time,
the
combination
of
the
contracts
is
evaluated.
The
Group
applies
the
practical
expedient
according
to
IFRS
15.63
concerning
significant
financing
components
arising
from
contracts
with
customers.
In
case
the
lead
time
between
the
payments
specified
in
the
contract
and
the
corresponding
transferral
of
the
promised
good
or
service
to
the
customer
is
one
year
or
less,
no
adjustment
is
made
for
the
effect
of
a
possible
significant
financing
component.
The
Group
also
applies
the
practical
expedient
stated
in
IFRS
15.94
according
to
which
an
entity
can
recognise
the
incremental
costs
of
obtaining
a
contract
as
an
expense
when
incurred
if
the
amortisation
period
of
the
asset
that
the
entity
would
have
recognised
is
one
year
or
less.
Wärtsilä
has
not
incurred
any
costs
for
obtaining
a
contract
to
be
recognised
as
an
asset.
Accounting
estimates
and
judgemen
ts
Revenue
from
certain
projects
and
long
-term
agreements
is
recognised
over
time
according
to
the
input
method
when
the
profit
on
the
project
or
agreement
can
be
reliably
determined.
The
progress
and
the
profitability
are
based
on
the
management’s
estimates,
which
require
significant
judgement
concerning
the
stage
of
completion,
the
cost
to
complete,
and
the
time
of
completion.
These
estimates
are
reviewed
regularly.
Recognised
revenue
and
costs
recorded
are
adjusted
during
the
project
when
assumptions
concerning
the
outcome
of
the
entire
project
are
updated.
Changes
in
assumptions
relate
to
changes
in
the
project’s
or
agreement’s
schedule,
the
scope
of
supply,
technology,
costs,
and
any
other
relevant
factors.
Establishing
whether
distinct
goods
or
services
are
considered
as
separate
performance
obligations
requires
judgement
and
might
impact
the
timing
and
amount
of
revenue
recognition.
Project
business
contracts
usually
involve
elements
of
variable
consideration.
At
each
reporting
date,
management
reassesses
the
transaction
price,
which
requires
significant
judgement
as
it
affects
the
timing
of
the
revenue
recognition.
The
valuation
of
accounts
receivables
also
includes
estimates
mainly
concerning
the
recoverability
of
receivables.
Determining
whether
different
contracts
with
the
same
customer
are
accounted
for
as
one
contract
involves
the
use
of
judgement,
as
it
requires
an
assessment
of
whether
the
contracts
are
negotiated
together
or
linked
in
any
other
way.
The
timing
and
amount
of
revenue
recognition
can
vary
depending
on
whether
two
contracts
are
accounted
for
separately,
or
as
one
single
arrangement.
Warranty
provisions
are
recorded
on
the
recognition
of
revenue.
The
provision
is
based
on
the
accumulated
experience
of
the
level
of
warranty
needed
to
manage
future
and
current
cost
claims.
Products
can
contain
new
and
complex
technology
that
can
affect
warranty
estimates
,
with
the
result
that
earlier
recognised
provisions
are
not
always
sufficient.
Net
sales
by
revenue
type
MEUR
2020
2019
Products
Marine
Power
586
650
Marine
Systems
139
133
Voyage
21
24
Energy
319
337
Portfolio
Business
27
38
Total
1,091
1,184
Goods
and
services
Marine
Power
309
369
Marine
Systems
60
69
Voyage
47
63
Energy
88
92
Portfolio
Business
8
10
Total
511
603
Projects
Marine
Power
712
726
Marine
Systems
606
750
Voyage
173
185
Energy
919
1,053
Portfolio
Business
147
187
Total
2,557
2,899
Long
-term
agreements
Marine
Power
142
178
Marine
Systems
2
1
Voyage
7
8
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Energy
293
296
Portfolio
Business
2
Total
445
484
Total
4,604
5,170
Timing
of
satisfying
performance
obligations
MEUR
2020
2019
At
a
point
in
time
Marine
Power
1,536
1,687
Marine
Systems
546
618
Voyage
169
195
Energy
809
1,102
Portfolio
Business
90
124
Total
3,150
3,728
Over
time
Marine
Power
213
236
Marine
Systems
261
334
Voyage
79
85
Energy
811
676
Portfolio
Business
92
113
Total
1,455
1,442
Total
4,604
5,170
2.3.
OTHER
OPERATING
INCOME
AND
EXPENSES
Accounting
principles
Other
operating
income
and
expenses
comprise
income
and
expenses
that
do
not
directly
relate
to
the
operating
activities.
Other
operating
income
includes
,
for
example,
gains
from
the
sale
of
assets
and
regular
incomes,
such
as
rental
income
,
and
gains
relating
to
business
combinations,
which
have
not
been
derived
from
primary
activities.
Other
operating
income
includes
also
grants.
Government
al
and
other
grants
are
recognised
in
the
statement
of
income
on
a
systematic
basis
in
the
same
periods
in
which
the
expenses
are
incurred.
Other
operating
expenses
include,
for
example
,
travel
costs,
legal
and
consultancy
costs,
rental
costs,
voluntary
personnel
related
costs,
and
administrative
costs.
Also
,
expenses
related
to
short
-term
lease
contracts
and
lease
contracts
of
low-value
assets
are
recognised
in
other
operating
expenses
.
In
addition,
losses
related
to
the
sale
of
assets
,
as
well
as
losses
arising
from
modifications
and
terminations
of
lease
agreements
,
are
recognised
in
other
operating
expenses.
Other
operating
income
MEUR
2020
2019
Capital
gains
11
15
Government
grants
17
8
Sale
of
scrapped
material
2
3
Sale
of
by-products
2
2
Rental
income
0
1
Income
related
to
cancelled
orders*
2
2
Insurance
indemnities
3
9
Other**
24
27
Total
61
67
*
Expenses
related
to
cancelled
orders
are
reco
gnised
on
respective
expense
accounts.
**
Other
does
not
include
any
significant
single
items.
Other
operating
expenses
MEUR
2020
2019
Travel
costs
75
134
Rental
costs
40
48
Legal
and
consultancy
costs
77
95
Information
technology
costs
59
65
Other
personnel
related
costs
48
59
Administrative
costs
39
49
Other*
93
128
Total
431
578
*
Other
does
not
include
any
significant
single
items.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
2.4.
MATERIAL
AND
SERVICES
Accounting
principles
Material
and
services
expenses
relate
to
purchases
of
goods
and
consumables
from
suppliers
for
manufacturing
less
discounts
and
tax
refunds
related
to
purchases.
Exchange
gains
or
losses
on
accounts
payable
are
included.
MEUR
2020
2019
Purchases
during
the
financial
period
-1,475
-1,723
Change
in
inventories
-50
7
External
services
-1,026
-1,287
Total
-2,551
-3,003
2.5.
EMPLOYEE
BENEFIT
EXPENSES
Accounting
principles
Employee
benefits
are
all
forms
of
consideration
given
in
exchange
for
service
s
rendered
by
employees
or
for
the
termination
of
employment.
In
addition,
the
Group
has
personnel
expenses
related
to
share
-based
payments
and
other
personnel
expenses.
The
company’s
incentive
scheme,
which
is
tied
to
the
price
development
of
the
company’s
share
during
a
pre-determined
timeframe,
is
measured
at
the
fair
value
of
the
share
on
the
reporting
date
and
reported
in
the
statement
of
income
for
the
term-to
-maturity
of
the
bonus
scheme.
An
upper
limit
is
set
for
the
bonus.
When
a
bonus
scheme
ends,
and
the
employment
requirement
is
fulfilled,
the
bonus
is
settled
in
cash
and/or
shares.
The
Group
companies
have
various
pension
and
other
post
-employment
benefit
plans
in
accordance
with
local
conditions
and
practices
worldwide.
These
plans
are
classified
either
as
defined
contribution
plans
or
defined
benefit
plans.
In
defined
contribution
plans,
the
Group
pay
s
fixed
contributions
into
a
separate
entity
,
such
as
an
insurance
company.
The
Group
has
no
legal
or
constructive
obligation
to
pay
further
contributions
if
the
fund
does
not
hold
sufficient
assets
to
pay
employee
benefits.
The
contributions
are
recognised
in
employee
benefit
expenses
in
the
statement
of
income
in
the
period
to
which
they
relate.
Accounting
principles
for
defined
benefit
plans
are
presented
in
Note
4.7.
Pension
obligations.
MEUR
2020
2019
Wages
and
salaries
984
1,028
Pension
costs
Defined
benefit
plans
12
12
Defined
contribution
plans
64
74
Other
compulsory
personnel
costs
132
146
Total
1,192
1,260
Management
remuneration
is
specified
in
Note
7.2.
Related
party
disclosures.
Long-term
incentive
schemes
Wages
and
salaries
include
EUR
7
million
(4)
in
expenses
arising
from
share
-based
long-term
incentive
schemes.
At
the
end
of
2020,
Wärtsilä
had
three
active
long-term
incentive
schemes.
These
schemes
are
tied
to
the
price
development
of
the
company’s
share
during
a
pre-determined
timeframe,
and
an
upper
limit
is
set
for
the
payable
incentive.
When
an
incentive
scheme
ends
and
the
employment
requirement
is
fulfilled,
the
incentive
is
settled
in
cash
(2018-2020
incentive
scheme)
or
in
company
shares
(2019-
2021
and
2020-2022
incentive
schemes).
The
Board
of
Management
members
shall
acquire
Wärtsilä
shares
with
50%
of
the
net
bonuses
received,
until
the
share
ownership
corresponding
to
the
individuals'
annual
gross
base
salary
level
has
been
achieved.
The
payment
for
incentive
schemes
is
based
on
the
share
price
development
during
a
three
-year
period.
The
2018-2020
incentive
scheme
comprises
3,150,000
rights,
the
2019-2021
incentive
scheme
4,585,000
rights
and
the
2020
-2022
incentive
scheme
8,400,000
rights.
For
the
incentive
scheme
2018-
2020
the
share
price
basis
is
EUR
22.58,
for
the
incentive
scheme
2019-
2021
EUR
16.76,
and
for
the
incentive
scheme
2020-2022
EUR
11.10.
The
incentive
schemes
take
into
account
100%
of
dividends
paid,
and
the
paid
bonus
cannot
exceed
EUR
8.47
per
incentive
right
in
the
2018-2020
scheme,
EUR
6.56
in
the
2019-2021
scheme
,
or
EUR
4.31
in
the
2020
-2022
scheme.
The
incentive
rights,
which
are
settled
in
cash,
are
valued
and
recognised
at
fair
value
on
the
balance
sheet
date
taking
into
account
the
proportion
of
vesting
period
passed.
The
incentive
rights,
which
are
settled
in
company
shares,
are
valued
at
fair
value
on
the
grant
date
of
the
scheme
and
are
expensed
evenly
during
the
vesting
period.
The
fair
value
determined
for
the
incentive
right
in
2019
-2021
scheme
is
EUR
2.69
and
in
2020-
2022
scheme
EUR
1.34
.
2020
2019
Personnel
on
average
18,307
19,110
Personnel
at
the
end
of
the
financial
period
17,792
18,795
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
2.6.
INCOME
TAXES
Accounting
principles
The
statement
of
income
includes
taxes
payable
based
on
the
Group’s
consolidated
taxable
income
for
the
financial
period
in
accordance
with
local
tax
regulations,
tax
adjustments
for
previous
financial
periods,
and
changes
in
deferred
taxes.
Tax
effects
related
to
transactions
recognised
through
the
statement
of
income
and
other
events
are
recognised
in
the
statement
of
income.
Tax
effects
related
to
transactions
or
other
events
to
be
presented
as
components
of
other
comprehensive
income
or
directly
in
equity
are
also
recognised,
respectively,
in
other
comprehensive
income
or
directly
in
equity.
The
current
income
tax
charge
is
calculated
according
to
tax
laws
enacted,
or
substantively
enacted,
on
the
balance
sheet
date
in
the
countries
where
the
company
and
its
subsidiaries
operate
and
generate
taxable
income.
Accounting
estimates
and
judgements
The
Group
is
subject
to
income
taxes
in
several
jurisdictions
and
the
computation
of
the
Group´s
income
tax
expense
and
income
tax
liabilities
require
judgement
and
estimation.
Income
tax
positions
are
regularly
evaluated
by
the
management
to
identify
situations
when
there
might
be
uncertainty
due
to
tax
regulation
being
subject
to
interpretation.
Provi
sions
for
these
uncertain
tax
positions
are
recognised
when
it
is
considered
more
likely
than
not
that
the
positions
will
be
challenged
by
the
tax
authorities.
The
provision
recognised
is
based
on
the
estimation
of
the
amount
of
the
final
taxes
to
be
paid
to
the
tax
authorities.
MEUR
2020
2019
Income
taxes
for
the
financial
period
-107
-130
for
prior
financial
periods
8
-8
Change
in
deferred
tax
origination
and
reversal
of
temporary
differences
40
43
changes
in
tax
rates
-2
Total
-58
-97
Reconciliation
of
effective
tax
rate:
Profit
before
taxes
191
315
Tax
calculated
at
the
domestic
corporate
tax
rate
20.0%
-38
-63
Effect
of
changed
tax
rates
-2
Effect
of
different
tax
rates
in
foreign
subsidiaries
15
15
Effect
of
income
not
subject
to
tax
and
non-deductible
expenses
-7
-1
Effect
of
share
of
result
of
associates
and
joint
ventures
1
-2
Utilisation
of
previously
unrecognised
tax
losses
carried
forward
2
1
Unrecognised
taxes
on
losses
carried
forward
-25
-13
Other
taxes*
-14
-10
Other
temporary
differences
-13
Income
taxes
for
prior
financial
periods
8
-8
Tax
charge
in
the
consolidated
statement
of
income
-58
-97
Effective
tax
rate
(%)
30.3
30.7
*
Other
taxes
consist
mainly
of
withholding
taxes
not
utilised
and
taxes
not
directly
based
on
taxable
income.
Income
taxes
related
to
other
comprehensive
income
are
presented
in
Consolidated
statement
of
comprehensive
income.
Changes
in
deferred
tax
assets
and
liabilities
are
presented
in
Note
4.6.
Deferred
taxes.
In
some
countries
Wärtsilä
is
subject
to
tax
audits,
which
can
result
in
tax
reassessment
decisions
and
obligations
to
pay
additional
taxes
and
related
payments.
2.7.
EARNINGS
PER
SHARE
Earnings
per
share
is
calculated
by
dividing
the
profit
for
the
financial
period
attributable
to
equity
holders
of
the
parent
company
by
the
adjusted
average
number
of
shares
outstanding.
During
the
financial
periods
there
were
no
programmes
with
dilutive
effect.
MEUR
2020
2019
Profit
for
the
financial
period
attributable
to
equity
holders
of
the
parent
company
134
217
Thousands
of
shares
adjusted
average
number
of
shares
outstanding*
591,723
591,723
Earnings
per
share
attributable
to
equity
holders
of
the
parent
company
(basic
and
diluted):
Earnings
per
share
(EPS),
basic
and
diluted,
EUR
0.23
0.37
*
Additional
information
on
the
number
of
shares
is
presented
in
Note
5.5.
Equity.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
3.
INTANGIBLE
AND
TANGIBLE
ASSETS
3.1.
GOODWILL
Accounting
principles
Goodwill
is
the
difference
between
the
aggregate
of
the
acquisition
-date
fair
value
of
the
consideration
transferred,
and
the
acquirer’s
share
of
the
company’s
net
identifiable
assets
and
liabilities
measured
at
fair
value
on
the
acquisition
date.
The
consideration
is
measured
at
fair
value,
including
also
the
acquirer’s
previously
held
equity
interest.
Impairment
of
goodwill
The
carrying
amount
of
goodwill
allocated
to
cash
generating
units
(CGU)
is
reviewed
annually
for
signs
of
possible
impairment
,
or
more
frequently
should
any
indication
of
impairment
arise.
If
any
such
indication
exists,
the
recoverable
amount
of
the
goodwill
is
estimated.
In
order
to
define
a
possible
impairment,
the
Group’s
assets
are
divided
into
the
smallest
possible
cash
generating
units,
which
are
mainly
independent
of
other
units
,
and
the
cash
flows
of
which
are
separately
identifiable
and
to
a
large
extent
independent
of
the
cash
flows
of
other
similar
units.
An
impairment
loss
is
recognised
when
the
carrying
amount
of
an
asset
is
greater
than
its
recoverable
amount.
The
recoverable
amount
is
the
higher
of
an
asset’s
fair
value
less
costs
to
sell
and
its
value
in
use.
The
value
in
use
for
goodwill
is
based
on
the
expected
discounted
future
net
cash
flows
resulting
from
the
asset
or
cash
generating
unit.
A
pre-tax
rate,
which
reflects
the
markets’
position
on
the
time
value
of
money
and
asset
-specific
risks,
is
used
as
the
discount
rate.
An
impairment
loss
is
recognised
immediately
as
depreciation,
amortisation
and
impairment
in
the
statement
of
income.
An
impairment
loss
recognised
for
goodwill
is
not
reversed
under
any
circumstances.
Accounting
estimates
and
judgement
s
The
recoverable
amounts
of
goodwill
are
determined
for
all
cash
generating
units
annually,
or
more
often
if
there
is
an
indication
of
an
impairment,
where
its
value
in
use
is
determined.
The
value
in
use
is
determined
using
estimates
of
future
market
development,
such
as
growth
and
profitability,
as
well
as
other
significant
factors.
The
most
important
factors
underlying
such
estimates
are
the
net
sales
growth
in
the
market
area,
the
operating
margin,
the
useful
life
of
the
assets,
future
investment
needs,
and
the
discount
rate.
Changes
in
these
ass
umptions
can
significantly
affect
the
expected
future
cash
flows.
Significant
judgement
has
been
used
when
Wärtsilä
management
has
evaluated
indications
of
impairment.
The
recoverable
amounts
of
the
operating
segments
have
been
evaluated
against
the
carrying
values.
The
full
financial
impact
of
the
coronavirus
(C
OVID-19)
outbreak
cannot
be
quantified
at
this
time,
as
it
will
depend
on
the
duration
and
severity
of
the
virus
in
different
geographies,
which
largely
depends
on
the
measures
taken
to
contain
the
virus,
which
in
turn
will
determine
the
pace
of
recovery
in
these
geographies.
Therefore,
estimates
for
market
development,
growth,
and
other
significant
factors
is
challenging
in
the
current
situation.
The
assumptions
used
in
the
evaluation
of
goodwill
recoverability
are
based
on
management’s
best
estimates
under
the
current
circumstances.
Goodwill
2020
MEUR
2020
Wärtsilä
Group
Wärtsilä
on
1
January
1,380
Changes
in
exchange
rates
-41
Wärtsilä
on
30
June
1,339
Changes
in
exchange
rates
-3
Disposals
and
impairments
-4
Reclassification
to
assets
held
for
sale
-7
Wärtsilä
on
31
December
1,325
Disposals
and
impairments
of
goodwill
relate
to
divested
businesses
in
Portfolio
Business.
These
businesses
were
first
classified
as
assets
held
for
sale
and
later
divested
.
The
total
impact
of
these
divestments
on
the
profit
for
the
financial
period
is
presented
in
Note
6.2.
Disposals.
All
businesses
currently
presented
as
assets
held
for
sale
belong
to
Portfolio
Business.
The
total
impact
on
the
profit
for
the
financial
period
is
presented
in
Note
6.3.
Assets
held
for
sale.
Goodwill
allocation
Goodwill
arising
from
business
acquisitions
has
been
allocated
to
the
new
operating
segments
and
other
business
activities,
which
are
also
the
Group’s
CGUs
in
impairment
testing
of
goodwill.
From
1
July
2020
onwards,
these
are
Marine
Power,
Marine
Systems,
Voyage,
Energy,
and
Portfolio
Business.
The
reallocation
has
been
performed
using
a
relative
value
approach
with
minor
exceptions.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
MEUR
1.7.2020
31.12.2020
Marine
Power
535
534
Marine
Systems
165
165
Voyage
98
98
Energy
502
502
Portfolio
Business
39
26
Total
1,339
1,325
Intermediate
impairment
testing
Due
to
the
COVID
-
19
outbreak
and
the
new
organisational
structure,
Wärtsilä
performed
an
intermediate
impairment
testing
of
goodwill
during
the
second
quarter
of
2020.
As
a
result
of
the
impairment
test,
no
impairment
loss
for
the
CGUs
was
recognised
for
the
reporting
period
ended
30
June
2020.
Annual
impairme
nt
testing
of
goodwill
The
Group
performed
its
annual
impairment
testing
of
goodwill
during
the
third
quarter
of
the
year.
Wärtsilä
compared
the
recoverable
amount
of
each
business
against
its
carrying
amount
to
define
whether
there
were
any
indications
of
goodwill
impairment.
For
Marine
Power,
Marine
Systems,
Voyage,
and
Energy,
the
recoverable
amounts
were
defined
based
on
the
discounted
cash
flow
method,
derived
from
the
order
book
and
four
-year
cash
flow
projections.
The
estimated
cash
flows
of
the
CGUs
were
based
on
the
utilisation
of
existing
property,
plant,
and
equipment
in
their
current
condition
with
normal
maintenance
capital
expenditure,
excluding
any
potential
future
acquisitions.
Cash
flows
beyond
the
four
-year
period
were
calcul
ated
using
the
terminal
value
method.
For
the
Portfolio
Business
units,
which
were
classified
as
assets
held
for
sale,
the
recoverable
amounts
were
defined
based
on
estimations
of
the
selling
price
on
cash
-free,
debt
-free
basis.
For
the
other
business
units,
the
recoverable
amounts
were
defined
based
on
either
the
discounted
cash
flow
method
or
estimations
of
the
selling
price
on
cash
-free,
debt
-free
basis,
whichever
was
higher
at
the
time.
The
terminal
growth
rate
used
in
projections
is
based
on
manageme
nt’s
assessment
on
conservative
long-term
growth.
The
terminal
growth
rate
used
in
the
calculation
were:
Terminal
growth
rate,
%
2020
Marine
Power
1.5
Marine
Systems
1.5
Voyage
2.5
Energy
2.0
Portfolio
Business
0.0
The
key
driver
for
the
valuation
is
growth
in
the
global
economy,
and
in
particular,
the
development
of
the
global
power
market,
the
global
shipbuilding
industry,
and
the
demand
for
any
related
services.
The
projected
development
of
total
costs
in
the
market
affects
the
profitability,
whereas
no
single
cost
item
is
considered
to
have
a
material
impact.
The
valuation
driver
for
new
equipment
sales
is
growth
in
the
global
economy,
whereas
for
after
sales
the
drivers
are
also
the
demand
for
related
services
and
the
projected
development
in
labour
costs.
The
applied
discount
rates
are
the
weighted
average
pre-tax
cost
of
capital
(WACC)
for
each
CGU
as
defined
by
Wärtsilä.
The
components
of
the
WACC
rates
are
risk
-free
rate,
market
risk
premium,
industry
specific
beta,
cost
of
debt
and
debt
equity
ratio.
Wärtsilä
has
used
the
following
WACC
rates
for
each
CGU:
WACC
rate,
%
2020
Marine
Power
9.2
Marine
Systems
9.5
Voyage
9.2
Energy
9.6
Portfolio
Business
10.1
As
a
result
of
the
impairment
test,
no
impairment
loss
for
the
CGUs
was
recognised
for
the
financial
period
ended
on
30
September
2020.
The
recoverable
amounts
of
Marine
Power,
Marine
Systems,
and
Energy
CGUs
exceeded
their
respective
carrying
values
subst
antially.
Also,
the
defined
recoverable
amount
of
Voyage
CGU
exceeded
the
carrying
amount
of
the
unit.
The
key
assumption
for
Voyage
CGU
is
that
Voyage
is
estimated
to
break
even
within
the
next
few
years
on
the
EBITDA
level
and
that
its
growth
rate
will
exceed
the
Group
average.
Any
future
negative
changes
in
these
assumptions
would
have
an
adverse
impact
on
the
valuation
of
the
business.
According
to
the
measuring
requirements
related
to
assets
held
for
sale,
Wärtsilä
has
written
down
certain
assets
in
Portfolio
Business
in
2020.
Part
of
these
write-downs
related
to
goodwill.
However,
based
on
the
testing
conducted
in
the
annual
impairment
test,
there
was
no
additional
impairment
noted
for
Portfolio
Business.
There
are
no
recent
indications
of
impairmen
t
of
goodwill
after
the
annual
impairment
testing
.
Sensitivity
analysis
The
management
has
assessed
that
no
reasonable
possible
changes
in
the
key
assumptions
would
cause
the
carrying
amount
of
any
CGU
to
exceed
its
recoverable
amount.
A
s
ensitivity
analysis
has
been
carried
out
for
the
valuation
of
the
recoverable
amount
for
each
CGU
by
changing
the
assumptions
used
in
the
calculation.
A
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
change
in
an
assumption
that
would
cause
the
recoverable
amount
to
equal
the
carrying
amount
is
presented
in
the
table
below
separately
for
each
CGU.
Change
Marine
Power
Pre-tax
discount
rate
increase
more
than
8
percentage
points
Terminal
growth
rate
decrease
more
than
8
percentage
points
Profitability
decrease
more
than
51
percentage
Marine
Systems
Pre-tax
discount
rate
increase
more
than
25
percentage
points
Terminal
growth
rate
decrease
more
than
34
percentage
points
Profitability
decrease
more
than
72
percentage
Voyage
Pre-tax
discount
rate
increase
more
than
4
percentage
points
Terminal
growth
rate
decrease
more
than
3
percentage
points
Profitability
decrease
more
than
37
percentage
Energy
Pre-tax
discount
rate
increase
more
than
12
percentage
points
Terminal
growth
rate
decrease
more
than
13
percentage
points
Profitability
decrease
more
than
61
percentage
For
Portfolio
Business,
the
recoverable
amount
of
the
CGU
was
mainly
defined
based
on
estimations
of
the
selling
price
on
a
cash
-free
debt
-free
basis
for
each
individual
business
unit.
Thus,
the
change
in
the
pre-tax
discount
rate
and
in
the
terminal
growth
rate
only
has
minimal
impact
on
the
valuation
of
the
CGU.
The
recoverable
amount
of
the
CGU
would
need
to
decrease
by
9
percentage
to
equal
the
carrying
amount
of
the
CGU.
In
management’s
opinion,
the
changes
in
the
basic
assumptions
shall
not
be
seen
as
an
indication
that
these
factors
are
likely
to
materialise.
The
sensitivity
analyses
are
hypothetical
and
should
therefore
be
treated
with
caution.
Goodwill
2019
MEUR
2019
Wärtsilä
Group
Wärtsilä
on
1
January
1,355
Acquisitions
-1
Changes
in
exchange
rates
26
Total
1,380
Goodwill
allocation
Goodwill
arising
from
business
acquisitions
is
allocated
to
the
Group
cash
generating
units
(CGU)
that
are
the
Group´s
operating
segments
Wärtsilä
Marine
Business
and
Wärtsilä
Energy
Business.
As
of
1
January
2019,
the
goodwill
formerly
allocated
to
the
Group
CGU
has
been
allocated
to
the
respective
CGUs
based
on
the
fair
value
of
the
operating
segments.
The
operating
segments
represent
the
lowest
level
within
the
Group
at
which
the
goodwill
is
monitored.
The
companies
acquired
during
the
financial
period
are
integrated
within
the
respective
CGU
at
the
acquisition
date.
The
goodwill
per
CGU
is
presented
in
the
table
below.
Goodwill
per
cash
generating
unit
MEUR
2019
Wärtsilä
Marine
Business
847
Wärtsilä
Energy
Business
533
Total
1,380
Impairment
testing
of
goodwill
The
Group
performs
its
annual
impairment
testing
of
goodwill
on
30
September.
Impairment
of
goodwill
is
also
carried
out
when
changes
in
circumstances
indicate
that
the
carrying
amount
may
not
be
recoverable.
The
recoverable
amounts
from
the
CGUs
are
determined
based
on
value
-
in-use
calculations.
The
calculations
are
made
on
a
discounted
cash
flow
method
basis,
derived
from
the
order
book
and
five
-year
cash
flow
projections
from
strategic
plans
approved
by
management.
The
estimated
cash
flows
of
the
CGUs
are
based
on
utilisation
of
the
existing
property,
plant
and
equipment
in
their
current
condition
with
normal
maintenance
capital
expenditure,
excluding
any
potential
future
acquisitions.
Cash
flows
beyond
the
five
-year
period
are
calculated
using
the
terminal
value
method.
The
terminal
growth
rate
used
in
projections
is
based
on
management’s
assessment
on
conservative
long-term
growth.
The
terminal
growth
rate
used
is
2%.
The
key
driver
for
the
valuation
is
growth
in
the
global
economy
and,
in
particular,
the
development
of
the
global
power
market,
the
global
shipbuilding
industry,
and
the
demand
for
related
services.
The
projected
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
development
of
total
costs
in
the
market
affects
the
profitability,
whereas
no
single
cost
item
is
considered
to
have
a
material
impact.
The
valuation
driver
for
the
new
equipment
sales
is
growth
in
the
global
economy,
whereas
for
after
sales
the
drivers
are
also
the
demand
for
related
services
and
the
projected
development
in
labour
costs.
The
appl
ied
discount
rates
are
the
weighted
average
pre-tax
cost
of
capital
(WACC)
for
each
CGU
as
defined
by
Wärtsilä.
The
components
of
the
WACC
rates
are
the
risk
-free
rate,
market
risk
premium,
industry
specific
beta,
cost
of
debt,
and
debt
equity
ratio.
Wärtsilä
has
used
a
WACC
rate
of
9.1%
in
the
calculations
for
Wärtsilä
Marine
Business
CGU
and
a
WACC
rate
of
9.4%
for
Wärtsilä
Energy
Business
CGU.
As
a
result
of
the
impairment
tests,
no
impairment
loss
for
the
CGUs
was
recognised
for
the
financial
period
ended
31
December
2019.
The
recoverable
amounts
of
both
CGUs
exceeded
their
respective
carrying
value
substantially.
Sensitivity
analysis
The
management
has
assessed
that
no
reasonable
possible
changes
in
the
key
assumptions
would
cause
the
carrying
amount
of
either
CGU
to
exceed
its
recoverable
amount.
A
sensitivity
analysis
has
been
carried
out
for
the
valuation
of
the
recoverable
amount
for
each
CGU
by
changing
the
assumptions
used
in
the
calculations.
A
change
in
an
assumption
that
would
cause
the
recoverable
amount
to
equal
the
carrying
amount
is
presented
in
the
table
below
separately
for
each
CGU.
Change
Wärtsilä
Marine
Business
Pre-tax
discount
rate
increase
more
than
15
percentage
points
Terminal
growth
rate
decrease
more
than
35
percentage
points
Profitability
decrease
more
than
66
percentage
Wärtsilä
Energy
Business
Pre-tax
discount
rate
increase
more
than
13
percentage
points
Terminal
growth
rate
decrease
more
than
28
percentage
points
Profitability
decrease
more
than
64
percentage
In
management’s
opinion,
the
changes
in
the
basic
assumptions
should
not
be
seen
as
an
indication
that
these
factors
are
likely
to
materialise.
The
sensitivity
analyses
are
hypothetical
and
should
therefore
be
treated
with
caution.
3.
2.
OTHER
INTANGIBLE
ASSETS
Accounting
principles
Research
and
development
costs
Research
costs
are
expensed
in
the
reporting
period
during
which
they
occur.
Development
costs
are
capitalised
when
it
is
probable
that
the
development
project
will
generate
future
economic
benefits
for
the
Group
and
when
the
related
criteria,
including
commercial
and
technological
feasibility,
have
been
met.
These
projects
involve
the
development
of
new
or
significantly
improved
products
or
production
processes.
Earlier
expensed
development
costs
are
not
capitalised.
Capitalised
development
costs
are
measured
at
cost
less
accumulated
amortisations
and
impairment.
Capitalised
development
costs
are
amortised
and
the
cost
of
buildings,
machinery,
and
facilities
for
development
depreciated
on
a
straight
-line
basis
over
their
expected
useful
lives
of
5-10
years.
Amortisations
are
started
when
the
asset
is
completed
and
can
be
taken
into
use.
Before
that,
the
asset
is
tested
annually
for
impairment.
Grants
received
for
research
and
development
are
reported
as
other
operating
income.
Grants
related
to
capitalised
development
costs
are
netted
with
the
costs
incurred
before
the
capitalisation.
Other
intangible
assets
Other
intangible
assets
are
recognised
at
cost
if
the
cost
is
reliably
measurable
and
the
future
economic
benefits
for
the
Group
are
probable.
Wärtsilä’s
other
intangible
assets
include
patents,
licenses,
software,
customer
relations
and
other
intellectual
property
rights
that
can
be
transferred
to
a
third
party.
These
are
measured
at
cost,
except
for
intangible
assets
identified
in
connection
with
acquisitions,
which
are
measured
at
the
fair
value
at
the
acquisition
date.
The
cost
of
intangible
assets
comprises
the
purchase
price
and
all
costs
that
can
be
directly
attributed
to
preparing
an
asset
for
its
intended
use.
Other
intangible
assets
are
amortised
on
a
straight
-line
basis
over
their
estimated
useful
lives.
Intangible
assets,
for
which
the
time
limit
for
the
right
of
use
is
agreed,
are
amortised
over
the
life
of
the
contract.
Intangible
assets
identified
in
connection
with
acquisitions
are
amortised
over
their
delivery
times
or
estimated
useful
lives.
The
general
guidelines
for
scheduled
amortisation
are:
•
Software
3-
7
years
•
Development
expenses
5-10
years
•
Other
intangible
assets
5-20
years
The
amortisation
of
intangible
assets
is
discontinued
when
an
item
is
classified
as
held
for
s
ale.
A
gain
or
loss
arising
from
the
sale
of
intangible
assets
is
recognised
as
other
operating
income
or
other
operating
expenses
in
the
statement
of
income.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Impairment
of
assets
The
carrying
amounts
of
assets
are
reviewed
annually
for
signs
of
possible
impairment
or
more
frequently
should
any
indication
of
impairment
arise.
If
any
such
indication
exists,
the
recoverable
amount
of
the
asset
is
estimated
and
compared
to
the
carrying
amount
of
the
asset.
An
impairment
loss
is
recognised
when
the
carrying
amount
of
an
asset
is
greater
than
its
recoverable
amount.
The
recoverable
amount
is
the
higher
of
an
asset’s
fair
value
less
costs
to
sell
and
its
value
in
use.
An
impairment
loss
is
recognised
immediately
as
depreciation,
amortisation
and
impairment
in
the
statement
of
income.
In
connection
with
the
recognition
of
the
impairment
loss,
the
useful
life
of
the
amortisable
asset
is
reassessed.
An
earlier
impairment
loss
recognised
for
an
asset
is
reversed
if
the
estimates
used
to
determine
the
recoverable
amount
change.
However,
any
reversal
of
impairment
shall
not
exceed
the
asset’s
carrying
amount
less
impairment
loss.
Accounting
estimates
and
judgement
s
Assessing
the
probability
of
expected
future
economic
benefits
and
the
useful
lives
of
intangible
assets
require
management
judgement.
The
estimated
useful
lives
and
the
residual
values
are
reviewed
at
least
at
the
end
of
each
reporting
period,
and
if
they
differ
significantly
from
previous
estimates,
the
amortisation
periods
are
adjusted
accordingly.
Also
,
assessing
any
indication
of
impairment
requires
management
judgement.
2020
MEUR
Develop
-
ment
expenses
Construc
-
tion
in
progress
and
advances
paid
Other
intangible
assets
Total
Cost
on
1
January
2020
169
85
860
1,114
Changes
in
exchange
rates
0
0
-17
-18
Acquisitions
and
disposals
0
0
-1
-1
Additions
1
54
6
61
Decreases
and
other
changes
-2
1
-21
-22
Reclassifications
15
-17
1
0
Cost
on
31
December
2020
182
123
829
1,134
Accumulated
amortisation
and
impairment
on
1
January
2020
-104
-613
-717
Changes
in
exchange
rates
0
0
12
12
Accumulated
amortisation
on
decreases
and
other
changes
2
0
19
20
Amortisation
during
the
financial
period
-12
0
-43
-54
Impairments
-1
-1
-2
-4
Accumulated
amortisation
and
impairment
on
31
December
2020
-115
-1
-628
-743
Carrying
amount
on
31
December
2020
68
122
201
391
Development
costs
for
internally
generated
assets
capitalised
during
the
financial
period
amounted
to
EUR
52
million
(49).
The
carrying
amount
was
EUR
179
million
(135).
Purchase
price
allocation
amortisation
amounted
to
EUR
33
million
(41)
and
the
related
carrying
amount
was
EUR
171
million
(209).
2019
MEUR
Develop
-
ment
expenses
Construc
-
tion
in
progress
and
advances
paid
Other
intangible
assets
Total
Cost
on
1
January
2019
141
53
857
1,051
Changes
in
exchange
rates
11
11
Acquisitions
1
1
Additions
1
55
8
65
Decreases
and
other
changes
-1
-13
-14
Reclassifications
28
-24
-4
Cost
on
31
December
2019
169
85
860
1,114
Accumulated
amortisation
and
impairment
on
1
January
2019
-94
-565
-659
Changes
in
exchange
rates
-7
-7
Accumulated
amortisation
on
decreases
and
other
changes
11
11
Amortisation
during
the
financial
period
-11
-52
-62
Accumulated
amortisation
and
impairment
on
31
December
2019
-104
-613
-717
Carrying
amount
on
31
December
2019
65
85
247
397
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
3.3.
PROPERTY,
PLANT
AND
EQUIPMENT
Accounting
principles
Property,
plant
and
equipment
acquired
by
the
Group
are
measured
in
the
statement
of
financial
position
at
cost
less
accumulated
depreciation
and
impairment
losses.
The
cost
of
an
asset
includes
costs
directly
attributed
to
preparing
the
asset
for
its
intended
use.
Grants
received
are
reported
as
a
reduction
in
costs.
The
property,
plant
and
equipment
of
acquired
subsidiaries
are
measured
at
their
fair
value
at
the
acquisition
date.
The
borrowing
costs
that
are
directly
attributable
to
the
asset
acquisition,
construction
or
production,
and
to
the
completion
of
the
asset
for
its
intended
use
or
sale
requiring
necessarily
a
considerable
length
of
time,
will
be
capitalised
in
the
statement
of
financial
position
as
part
of
the
cost
of
the
asset.
Other
than
directly
attributable
borrowing,
costs
are
expensed
in
the
period
in
which
they
are
incurred.
Subsequent
expenditure
is
included
in
the
cost
of
an
asset
only
if
the
future
economic
benefits
are
probable
and
the
costs
are
reliably
measurable.
Expenditure
related
to
regular,
extensive
inspections
and
maintenance
is
treated
as
an
investment,
capitalised
and
depreciated
during
the
useful
life.
All
other
expenditure,
such
as
ordinary
maintenance
and
repairs,
is
recognised
in
the
statement
of
income
as
an
expense
as
incurred.
Depreciation
is
based
on
the
following
estimated
useful
lives:
•
Buildings
10-
40
years
•
Machinery
and
equipment
5
-20
years
•
Other
tangible
assets
3-10
years
Depreciation
is
expensed
on
a
straight
-line
basis
over
the
estimated
useful
lives
of
the
assets.
Land
is
not
depreciated,
as
its
useful
life
is
considered
as
infinite.
The
estimated
useful
lives
and
the
residual
values
are
reviewed
at
least
at
the
end
of
each
reporting
period,
and
if
they
differ
significantly
from
previous
estimates,
the
depreciation
periods
are
adjusted
accordingly.
Depreciation
of
property,
plant
and
equipment
is
discontinued
when
an
item
is
classified
as
held
for
sale.
A
gain
or
loss
arising
from
the
sale
of
property,
plant
and
equipment
is
recognised
as
other
operating
income
or
other
operating
expenses
in
the
statement
of
income.
Impairment
of
assets
The
carrying
amounts
of
assets
are
reviewed
annually
for
signs
of
possible
impairment
,
or
more
frequently
should
any
indication
of
impairment
arise.
If
any
such
indication
exists,
the
recoverable
amount
of
the
asset
is
estimated
and
compared
to
the
carrying
amount
of
the
asset.
An
impairment
loss
is
recognised
when
the
carrying
amount
of
an
asset
is
greater
than
its
recoverable
amount.
The
recoverable
amount
is
the
higher
of
an
asset’s
fair
value
less
costs
to
sell
and
its
value
in
use.
An
impairment
loss
is
recognised
immediately
as
depreciation,
amortisation
and
impairment
in
the
statement
of
income.
In
connection
with
the
recognition
of
the
impairment
loss,
the
useful
life
of
the
depreciable
asset
is
reassessed.
An
earlier
impairment
loss
recognised
for
an
asset
is
reversed
if
the
estimates
used
to
determine
the
recoverable
amount
change
.
However,
any
reversal
of
impairment
shall
not
exceed
the
asset’s
carrying
amount
less
impairment
loss
.
Accounting
estimates
and
judgement
s
Assessing
the
probability
of
expected
future
economic
benefits
and
useful
lives
of
property,
plant
and
equipment
require
management
judgement.
The
estimated
useful
lives
and
residual
values
are
reviewed
at
least
at
the
end
of
each
reporting
period,
and
if
they
differ
significantly
from
previous
estimates,
the
depreciation
periods
are
adjusted
accordingly.
Also
,
assessing
any
indication
of
impairment
requires
management
judgement.
2020
MEUR
Land
and
water
Build
-
ings
and
struc
-
tures
Machin
-
ery
and
equip
-
ment
Construc
-
tion
in
progress
and
ad-
vances
paid
Other
tangible
assets
Total
Cost
on
1
January
2020
30
283
798
32
25
1,167
Changes
in
exchange
rates
0
-7
-14
0
0
-22
Acquisitions
and
disposals
0
-1
-8
0
0
-10
Additions
0
4
26
22
2
54
Decreases
-5
-13
-35
0
0
-52
Reclassifications
0
4
16
-20
0
-1
Cost
on
31
December
2020
25
270
782
32
26
1,135
Accumulated
depreciation
and
impairment
on
1
January
2020
-1
-179
-659
0
-21
-860
Changes
in
exchange
rates
0
5
11
0
0
16
Accumulated
depreciation
on
decreases
and
disposals
0
11
37
0
0
49
Depreciation
during
the
financial
period
0
-12
-38
0
-1
-51
Impairments
0
-1
-5
0
0
-6
Accumulated
depreciation
and
impairment
on
31
December
2020
-1
-176
-654
0
-22
-853
Carrying
amount
on
31
December
2020
24
93
128
32
4
282
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
2019
MEUR
Land
and
water
Build
-
ings
and
struc
-
tures
Machin
-
ery
and
equip
-
ment
Construc
-
tion
in
progress
and
ad-
vances
paid
Other
tangible
assets
Total
Cost
on
1
January
2019
31
297
780
40
24
1,171
Transfer
to
right
-of
-use
assets
-1
-1
-2
Changes
in
exchange
rates
1
2
3
Additions
3
27
18
1
49
Decreases
-1
-18
-30
-50
Reclassifications
1
22
-25
-2
Cost
on
31
December
2019
30
283
798
32
25
1,167
Accumulated
depreciation
and
impairment
on
1
January
2019
-1
-177
-648
-21
-847
Changes
in
exchange
rates
-1
-1
Accumulated
depreciation
on
decreases
11
29
41
Depreciation
during
the
financial
period
-13
-40
-1
-54
Impairments
-1
-1
Accumulated
depreciation
and
impairment
on
31
December
2019
-1
-179
-659
-21
-860
Carrying
amount
on
31
December
2019
29
104
139
31
3
307
3.4.
LEASES
Accounting
principles
The
Group's
capitalised
lease
agreements
consist
mainly
of
office
premises,
vehicles
,
and
production
machinery
and
equipment.
The
average
lease
period
for
buildings
is
approximately
eight
years,
and
for
machinery
and
equipment
approximately
four
years.
The
Group
recognises
a
right-of-use
(ROU)
asset
and
a
lease
liability
at
the
commencement
of
the
lease.
Whether
a
contract
contains
a
lease
is
determined
based
on
whether
Wärtsilä
has
the
right
to
control
the
use
of
an
identified
asset
for
a
period
of
time.
At
the
commencement
date,
a
right
-of-
use
asset
as
defined
by
IFRS
16
is
measured
at
cost.
The
cost
of
the
right-
of-use
asset
shall
comprise
the
amount
of
the
initial
measurement
of
the
lease
liability,
any
lease
payments
made
at
or
before
the
commencement
date
(less
any
lease
incentives
received),
any
initial
direct
costs
incurred
by
the
lessee
and
an
estimate
of
costs
to
be
incurred
by
the
lessee
in
dismantling
and
removing
the
underlying
asset,
restoring
the
site
on
which
it
is
located
or
restoring
the
underlying
asset
to
the
condition
required
by
the
terms
and
conditions
of
the
lease,
unless
those
costs
are
incurred
to
produce
inventories.
The
nominal
lease
liability
is
initially
measured
at
the
present
value
of
the
lease
payments
over
the
lease
term.
The
lease
payments
include
fixed
payments,
amounts
to
be
expected
to
be
paid
under
residual
value
guarantees,
the
exercise
price
of
reasonably
certain
extension
options,
and
payments
of
penalties
for
terminating
a
lease
in
case
this
reflects
the
lease
term.
The
lease
payments
are
discounted
using
the
interest
rate
implicit
in
the
lease,
if
this
rate
can
be
readily
determined.
Otherwise
,
the
lessee´s
incremental
borrowing
rate
is
used.
The
incremental
borrowing
rates
used
are
the
sum
of
relevant
interbank
rates
and
the
average
margin
of
the
Group
loan
portfolio
,
and
are
currency
specific.
The
initial
measurement
of
the
lease
payments
does
not
include
possible
variable
elements.
Variable
lease
payments
not
included
in
the
initial
measurement
of
the
lease
liability
are
recognised
directly
in
the
statement
of
income
as
other
operating
expenses
.
The
lease
term
is
the
non-cancellable
period
of
the
lease
plus
the
period
covered
by
an
option
to
extend
or
terminate
if
the
lessee
is
reasonably
certain
to
exercise
the
option.
Subsequently,
the
right-of-
use
assets
are
measured
at
initial
measurement
less
accumulated
depreciation
and
impairment
losses.
The
right-of-use
assets
are
depreciated
and
interest
on
lease
liabilities
recognised
in
interest
expenses
in
the
statement
of
income
over
the
lease
term.
The
lease
liabilities
are
subsequently
measured
at
initial
recognition
less
occurring
lease
payments
that
are
allocated
to
the
principal.
Lease
payments
are
presented
as
repayments
of
liabilities
and
related
interest
expenses.
The
lease
payments
are
presented
in
the
cash
flow
from
financing
activities
,
and
the
interest
related
to
leases
are
presented
in
the
cash
flow
from
operating
activities.
Lease
payments
related
to
short-term
leases,
low-value
assets
,
and
variable
payments
are
presented
in
the
cash
flow
from
operating
activities.
Contracts
may
combine
different
kinds
of
obligations
to
the
supplier,
which
might
be
a
combination
of
lease
components
or
a
combination
of
lease
and
non
-lease
components.
These
lease
and
non-lease
components
are
accounted
for
separately
and
the
consideration
is
allocated
between
the
components
based
on
relative
stand-alone
selling
prices.
The
lease
and
non-lease
components
are
separated.
Should
separating
the
components
not
be
possible,
judgement
is
used
to
allocate
the
non-lease
component
in
the
accounting.
The
selection
of
separating
the
non-lease
component
or
not
from
the
lease
,
is
applied
to
the
whole
asset
class,
buildings,
and
machinery
and
equipment.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Modifications
to
lease
agreements
may
result
in
adjustments
to
existing
right-of-use
assets
and
lease
liabilities.
A
gain
or
loss
arising
from
a
modification
or
a
termination
of
a
lease
agreement
is
recognised
as
other
operating
income
or
other
operating
expenses
in
the
statement
of
income.
The
Group
applies
the
two
available
exemptions,
which
relate
to
either
short-term
contracts,
in
which
the
lease
term
is
less
than
12
months,
or
low
-value
assets,
which
are
expensed
to
other
operating
expenses.
Accounting
estimates
and
judgements
Management
judgement
based
on
realistic
estimates
is
used
when
determining
the
lease
term,
especially
concerning
lease
agreements
for
buildings
containing
termination
or
extension
options
and
lease
agreements
with
an
indefinite
lease
term.
MEUR
2020
2019
Land
and
buildings,
right-of
-use
assets
Carrying
amount
on
1
January
2020
174
203
Changes
in
exchange
rates
-6
Acquisitions
and
disposals
-2
Additions
29
28
Depreciation
and
impairment
-40
-43
Decreases
and
reclassifications
-6
-14
Carrying
amount
on
31
December
2020
151
174
Machinery
and
equipment,
right-of
-use
assets
Carrying
amount
on
1
January
2020
11
12
Additions
8
6
Depreciation
and
impairment
-7
-6
Decreases
and
reclassifications
-1
-1
Carrying
amount
on
31
December
2020
11
11
Lease
liabilities
Carrying
amount
on
1
January
2020
188
215
Changes
in
exchange
rates
-6
Acquisitions
and
disposals
-1
Additions
37
33
Interest
expenses
2
Payments
-45
-49
Other
adjustments
-7
-13
Carrying
amount
on
31
December
2020
166
188
Total
lease
liabilities
Non
-current
124
146
Current
42
42
MEUR
2020
2019
Amounts
recognised
in
statement
of
income
Depreciation
and
impairment
of
right-of
-use
assets
-47
-49
Interest
expenses
-4
-5
Expense
-
short
-term
leases
-27
-32
Expense
-
leases
of
low
-value
assets
-4
-6
Expense
-
variable
lease
payments
-4
-4
3.5.
DEPRECIATION,
AMORTISATION
AND
IMPAIRMENT
MEUR
2020
2019
Development
expenses
12
11
Purchase
price
allocation
amortisation
33
41
Other
intangible
assets
9
10
Buildings
and
structures
12
13
Land
and
buildings,
right
-of
-use
assets
40
43
Machinery
and
equipment
38
40
Machinery
and
equipment,
right-of
-use
assets
7
6
Other
tangible
assets
1
1
Impairment
21
15
Total
174
180
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
4.
WORKING
CAPITAL
AND
OTHER
BALANCE
SHEET
ITEMS
4.1.
INVENTORIES
Accounting
principles
Inventories
are
valued
at
the
lower
of
cost
and
net
realisable
value.
Materials
and
consumables
are
valued
at
weighted
average
cost
or
at
moving
average
price.
Finished
products
are
valued
at
direct
purchasing
and
manufacturing
costs
plus
allocated
purchasing
and
manufacturing
overhead
costs.
Work
in
progress
includes
costs
for
direct
labour
and
material
costs
,
and
allocated
overhead
costs
related
to
manufacturing
and
purchasing
when
control
has
not
yet
been
transferred
to
the
customer
.
Accounting
estimates
and
judgements
Writing
down
inventories
to
net
realisable
value
due
to
obsolete
and
excess
stock,
is
performed
based
on
the
management’s
best
estimate
on
the
balance
sheet
date.
An
analysis
of
inventory
ageing,
turn-
over,
and
compos
ition
compared
to
anticipated
future
use,
is
the
basis
for
the
estimates.
MEUR
2020
2019
Materials
and
consumables
453
484
Work
in
progress
632
736
Finished
products
45
53
Advances
paid
62
93
Total
1,192
1,365
In
2020,
EUR
24
million
(4)
impairment
for
obsolete
inventories
has
been
recognised
in
the
consolidated
statement
of
income.
The
total
value
of
inventories
related
to
assets
held
for
sale
amounts
to
EUR
23
million
(18).
Although
COVID-
19
has
impacted
spare
part
sales
volumes
to
some
extent,
the
impact
is
not
so
significant
that
it
would
elevate
the
inherent
risk
of
valuation
relating
to
inventories.
Cancellations
of
orders
have
been
largely
in
line
with
normal
levels
in
Wärtsilä.
Also,
Wärtsilä
safeguards
the
recoverability
of
work
in
progress
with
advance
payments
collected
from
customers.
4.2.
TRADE
RECEIVABLES
AND
CONTRACT
ASSETS
AND
LIABILITIES
Accounting
principles
Trade
receivables
are
recognised
when
the
right
to
consideration
becomes
unconditional.
The
Group’s
trade
receivables
are
measured
at
amortised
cost,
which
is
the
original
invoiced
amount
less
an
estimated
valuation
allowance
for
impairment.
The
Group
assesses
any
possible
increase
in
the
credit
risk
for
financial
assets
measured
at
amortised
cost
at
the
end
of
each
reporting
period
individually.
The
methodology
applied
depends
on
whether
there
has
been
a
significant
increase
in
credit
risk.
If
there
has
not
been
a
significant
increase
in
credit
risk,
the
loss
allowance
is
estimated
at
an
amount
equal
to
lifetime
expected
credit
losses
at
the
current
reporting
date.
For
trade
receivables
and
contract
assets,
a
simplified
approach
is
used,
and
the
loss
allowance
is
measured
at
the
estimate
of
the
lifetime
expected
credit
losses.
The
Group
uses
a
provision
matrix
for
estimating
the
expected
credit
loss
where
receivables
are
segregated
depending
on
the
ag
eing
category
and
the
origin
of
the
receivable.
The
Group
has
an
effective
collection
process
in
place
which
decreases
the
possible
risk
of
credit
losses.
Also,
to
mitigate
the
credit
risk,
advance
payments
and
payment
guarantees
are
in
use.
In
calculating
the
expected
credit
loss
rates,
the
Group
considers
historical
loss
rates
for
each
category,
and
adjusts
for
forward
looking
macroeconomic
data.
Based
on
the
analysis,
for
trade
receivables
not
due,
or
a
maximum
of
359
days
overdue,
an
impairment
of
0.1%
-2.0%
is
made.
In
addition
to
that,
trade
receivables
more
than
360
days
old
are
assessed
individually
for
impairment.
Examples
of
events
giving
rise
to
impairment
include
a
debtor’s
serious
financial
problems,
and
a
debtor’s
probable
bankruptcy
or
other
financial
arrangement.
Trade
receivables
are
permanently
written
off
when
there
is
no
reasonable
expectation
of
recovery.
The
Group
may
sell
undivided
interests
in
trade
receivables
on
an
ongoing
and
one
-time
basis
to
lending
institutions.
Financial
assets
sold
under
these
arrangements
are
excluded
from
trade
receivables
in
the
statement
of
financial
position
at
the
time
of
payment
from
the
acquirer,
providing
that
substantially
all
risks
and
rewards
have
been
transferred.
If
the
acquirer
has
not
settled
payment
to
the
extent
that
the
ownership,
risk
,
and
control
over
the
receivable
have
been
substantially
transferred,
then
such
financial
assets
sold
are
re-
recognised
in
the
statement
of
financial
position
at
the
end
of
the
reporting
period.
Contract
assets
and
liabilities
are
related
to
contracts
with
customers.
When
control
over
goods
or
services
is
transferred
to
a
customer
before
the
customer
pays
the
consideration,
the
receivable
is
recognised
as
a
contract
asset.
The
contract
asset
represents
the
right
to
future
consideration.
Contract
assets
primarily
relate
to
the
Group’s
right
to
consideration
for
transferred
goods
or
services,
but
which
is
not
yet
billed
at
the
reporting
date.
The
contract
assets
are
transferred
to
trade
receivables
when
the
rights
become
unconditional.
When
the
customer
pays
consideration
in
advance,
or
when
the
consideration
is
due
before
transferring
the
contractual
performance
obligation,
the
amount
received
in
advance
is
presented
as
a
contract
liability.
Contract
liabilities
are
recognised
as
revenue
when
the
Group
performs
under
the
contract.
Advances
received
and
deferred
revenue
relate
to
payment
s
received,
or
invoicing
in
excess
of
revenue
recognised.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Accounting
estimates
and
judgements
Estimated
expected
credit
loss
provisions
are
based
on
management’s
best
judgement.
Management
judgement
includes
past
years’
experience
and
a
forward
-looking
understanding
of
the
client
’s
payment
behaviour
and
economic
situation.
Assessing
whether
or
not
it
is
probable
that
the
consideration
from
contracts
with
customers
will
be
collected
requires
judgement,
and
might
impact
the
timing
and
amount
of
revenue
recognition.
Contract
assets
and
liabilities
MEUR
2020
2019
Trade
receivables
953
1,255
Contract
assets
389
515
Contract
liabilities
Advances
received
452
452
Deferred
income
524
465
Trade
receivables
and
contract
assets
Non
-current
30
19
Current
1,311
1,752
Contract
liabilities
Non
-current
51
38
Current
926
880
Revenue
recognised
in
the
financial
period
that
was
included
in
the
contract
liability
on
1
January
880
888
Unsatisfied
performance
obligations,
all
revenue
types
6,748
7,427
of
which
remaining
performance
obligations
from
projects
and
contracts
under
execution
3,898
3,959
The
contract
assets
and
liabilities
arise
from
long
-term
service
agreements
and
projects
recognised
over
time,
such
as
gas
solutions
construction
contracts,
integrated
solutions
projects,
ship
design,
and
energy
solutions
turnkey
contracts.
The
decrease
in
contract
assets
arises
from
usual
business
-related
project
variations
mainly
in
Energy
business.
Also
,
the
increase
in
contract
liabilities
arises
from
usual
business
-related
project
variations,
mainly
in
Marine
Systems
business.
Credit
risk
included
in
Wärtsilä’s
receivables
and
the
recoverability
of
contract
assets
has
been
evaluated
under
the
uncertain
ty
caused
by
the
COVID
-19
pandemic.
There
has
not
been
any
significant
indication
of
change
in
customer
payment
behavior,
and
therefore
same
principles
have
been
applied
for
expected
credit
loss
recognition
as
in
the
annual
report
2019.
The
collection
of
trade
receivables
has
been
emphasised.
The
risk
in
the
recoverability
of
the
contract
assets
is
not
seen
to
have
significantly
increased.
As
of
the
reporting
date,
Wärtsilä
has
not
received
any
significant
cancellations
for
projects
or
long
-term
agreements
under
execution.
Cancellations
and
postponements
of
orders
have
largely
been
in
line
with
the
normal
levels.
Ageing
of
trade
receivables
2020
2019
MEUR
Trade
receivables
of
which
impaired
Trade
receivables
of
which
impaired
Not
past
due
657
1
788
1
Past
due
1–30
days
112
0
149
0
Past
due
31–180
days
123
2
227
2
Past
due
181–360
days
29
3
73
1
Past
due
1
year
93
56
81
57
Total
1,014
61
1,317
61
In
2020,
the
result
impact
of
write-offs
was
EUR
-5
million
(-7).
Impairment
MEUR
2020
2019
Impairment,
beginning
of
period
61
62
Money
received
-27
-10
Impairment
during
the
period
34
17
Write
-off
during
the
period
-5
-7
Impairment,
end
of
period
61
61
The
Group
sells
trade
receivables
in
an
amount
that
is
currently
not
significant
compared
to
the
trade
receivables
as
a
whole.
Sold
receivables
have
been
de
-recognised
in
the
statement
of
financial
position.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
4.3.
OTHER
RECEIVABLES
Accounting
principles
Other
receivables
are
recognised
at
amortised
cost.
MEUR
2020
2019
Derivatives
37
24
Interest
and
other
financial
items
4
6
Insurance
receivables
3
6
Rental
accruals
2
3
Prepaid
expenses
6
14
Other
accruals
34
41
Loan
receivables
2
2
Defined
benefit
plans
1
1
VAT
receivables
124
111
Other*
56
88
Total
269
296
Non
-current
11
15
Current
258
281
*
Other
receivables
includes
payroll
related
tax
receivables
of
EUR
7
million
(9)
in
Brazil,
which
cannot
be
utilised
likely
within
a
year.
In
2019
current
other
receivables
also
included
a
receivable
of
EUR
21
million
relating
to
disposal
of
pump
business,
which
has
been
received
in
2020.
4.4.
TRADE
PAYABLES
AND
OTHER
LIABILITIES
Accounting
principles
Trade
payables
and
other
liabilities
are
initially
recognised
at
fair
value
and
subsequently
measured
at
amortised
cost.
MEUR
2020
2019
Trade
payables
411
624
Accrued
expenses
315
320
Personnel
costs
154
125
Derivatives
27
23
Interest
and
other
financial
items
4
4
Other
accruals
43
41
VAT
liabilities
40
39
Other
81
70
Total
1,076
1,247
Non
-current
1
1
Current
1,075
1,246
4.5.
PROVISIONS
Accounting
principles
Provisions
are
recognised
in
the
statement
of
financial
position
when
the
Group
has
a
present
legal
or
constructive
obligation
as
a
result
of
a
past
event,
and
it
is
probable
that
an
outflow
of
economic
benefits
will
be
required
to
settle
the
obligation
and
a
reliable
estimate
can
be
made
of
the
amount
of
the
obligation.
Provisions
can
arise,
for
example,
from
warranties,
environmental
risks,
litigation,
foreseeable
losses
on
projects,
and
restructuring
costs.
The
amount
to
be
recognised
as
provisions
corresponds
to
the
management’s
best
estimate
of
the
expenses
that
will
be
necessary
to
meet
the
existing
obligation
at
the
end
of
the
reporting
period.
Warranty
provisions
include
estimated
future
warranty
costs
relating
to
products
delivered.
The
amount
of
future
warranty
costs
is
based
on
accumulated
historical
experience.
Typically
the
standard
warranty
period
is
one
year
from
the
delivery
onwards.
Provisions
for
restructuring
costs
are
made
once
the
restructuring
plan
has
been
approved
and
the
implementation
started,
or
the
personnel
concerned
have
been
informed
of
the
terms.
The
plan
must
indicate
which
activities
and
personnel
will
be
affected
,
as
well
as
the
timing
and
cost
of
implementation.
The
Group
is
a
defendant
in
a
number
of
legal
cases
which
arise
out
of,
or
are
incidental
to,
the
ordinary
course
of
its
business.
These
lawsuits
concern
mainly
issues
,
such
as
contractual
and
other
liability,
labour
relations,
property
damage
and
regulatory
matters.
The
Group
receives
from
time
to
time
claims
of
different
amounts
and
with
varying
degrees
of
substantiation.
It
is
the
Group’s
policy
to
provide
for
amounts
related
to
the
claims
,
as
well
as
for
the
litigation
and
arbitration
matters
when
an
unfavourable
outcome
is
probable
and
the
amount
of
loss
can
be
reasonably
estimated.
Accounting
estimates
and
judgements
The
Group
is
a
defendant
in
a
number
of
legal
cases
arising
from
its
business
operations.
A
provision
for
a
court
case
is
recognised
when
an
unfavourable
result
is
probable,
and
the
loss
can
be
determined
with
reasonable
certainty.
The
final
result
can
differ
from
these
estimates.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
2020
MEUR
Litigation
Warranties
Onerous
contracts
Restruc
-
turing
Other
provisions
Total
Provisions
on
1
January
2020
10
174
89
13
38
323
Changes
in
exchange
rates
0
-2
-3
0
-1
-6
Disposals
0
-2
0
0
0
-2
Additions
2
49
87
12
21
170
Used
provisions
-1
-42
-87
-13
-5
-148
Released
provisions
0
-2
-6
-2
-2
-13
Provisions
on
31
December
2020
10
174
80
9
50
324
Non
-current
55
Current
269
There
is
currently
one
unusually
sizeable
claim,
but
it
is
highly
unlikely
that
the
outcome
of
it
will
be
unfavourable.
The
claim
is
treated
as
a
contingent
liability.
2019
MEUR
Litigation
Warranties
Onerous
contracts
Restruc
-
turing
Other
provisions
Total
Provisions
on
1
January
2019
21
172
67
7
38
305
Changes
in
exchange
rates
1
Additions
4
52
100
20
14
190
Used
provisions
-14
-51
-71
-13
-9
-159
Released
provisions
-1
-7
-2
-5
-14
Provisions
on
31
December
2019
10
174
89
13
38
323
Non
-current
45
Current
278
4.6.
DEFERRED
TAXES
Accounting
principles
Deferred
tax
liabilities
and
assets
are
calculated
on
temporary
differences
arising
from
the
difference
between
the
tax
basis
of
assets
and
liabilities
,
and
the
carrying
values
using
the
enacted
or
substantially
enacted
tax
rates
at
the
end
of
t
he
reporting
period.
The
statement
of
financial
position
includes
deferred
tax
liabilities
in
their
entirety
and
deferred
tax
assets
at
their
estimated
probable
amount.
Deferred
tax
assets
and
liabilities
are
offset
when
there
is
a
legally
enforceable
right
to
offset
current
tax
assets
against
current
tax
liabilities,
and
when
the
deferred
tax
assets
and
liabilities
relate
to
income
taxes
levied
by
the
same
taxation
authority
on
either
the
same
taxable
entity
,
or
different
taxable
entities
which
intend
to
settle
the
balances
on
a
net
basis.
Accounting
estimates
and
judgements
Estimates
of
tax
liabilities
and
receivables
relate
mainly
to
the
expected
result
of
ongoing
tax
audits,
and
to
the
recognition
of
deferred
tax
receivables
from
tax
losses.
Deferred
tax
assets
on
unutilised
tax
losses
and
other
temporary
differences
are
recognised
to
the
extent
it
is
highly
probable
that
taxable
profit
is
available.
No
deferred
tax
assets
are
recognised
from
tax
losses
when
there
is
uncertainty
of
their
utili
sation.
Changes
in
deferred
taxes
during
2020
MEUR
1
January
2020
Recog
-
nised
in
the
con-
solidated
statement
of
income
Other
compre
-
hensive
income
Transla
-
tion
dif-
ferences
Acquisi
-
tions
and
disposals
31
December
2020
Deferred
tax
assets
Tax
loss
carry
-forwards
34
27
0
-1
-1
58
Pension
obligations
27
-1
-1
0
0
25
Provisions
35
2
0
-1
0
36
Elimination
of
intragroup
margin
in
inventories
6
1
0
0
0
7
Fair
value
reserve
6
0
1
-1
0
6
Other
temporary
differences
55
10
0
-4
2
63
Reclassification
to
assets
held
for
sale
-8
-12
Total
155
39
0
-8
0
183
Deferred
tax
liabilities
Intangible
assets
and
property,
plant
and
equipment
59
-7
0
-2
0
50
Fair
value
reserve
1
0
1
0
0
2
Other
temporary
differences
32
5
-1
-1
1
36
Reclassification
to
assets
held
for
sale
-8
-12
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Total
83
-1
0
-2
1
76
Net
deferred
tax
assets/liabilities
72
40
0
-6
-1
107
On
31
December
2020,
the
Group
had
temporary
differences
on
which
no
deferred
tax
assets
were
booked
,
totalling
EUR
68
million
(64),
as
it
is
uncertain
if
they
will
be
realised.
Most
of
the
unrecognised
deferred
tax
assets
are
related
to
cumulative
tax
losses.
Of
these,
EUR
19
million
(29)
will
expire
within
the
next
five
years
and
the
rest
will
expire
later
or
never.
Most
of
the
cumulative
tax
losses
on
which
deferred
tax
assets
have
been
booked
will
never
expire.
Changes
in
deferred
taxes
during
2019
MEUR
1
January
2019
Recog
-
nised
in
the
con-
solidated
statement
of
income
Other
compre
-
hensive
income
Transla
-
tion
dif-
ferences
Acquisi
-
tions
31
December
2019
Deferred
tax
assets
Tax
loss
carry
-forwards
18
17
-1
34
Pension
obligations
21
1
5
27
Provisions
28
7
35
Elimination
of
intragroup
margin
in
inventories
5
1
6
Fair
value
reserve
9
-3
6
Other
temporary
differences
49
6
-1
55
Reclassification
to
assets
held
for
sale
-8
Total
129
32
2
-2
155
Deferred
tax
liabilities
Intangible
assets
and
property,
plant
and
equipment
66
-10
2
59
Fair
value
reserve
1
1
Other
temporary
differences
32
32
Reclassification
to
assets
held
for
sale
-8
Total
99
-10
1
1
83
Net
deferred
tax
assets/liabilities
30
41
1
-1
-2
72
4.7.
PENSION
OBLIGATIONS
Accounting
principles
Group
companies
in
different
countries
have
various
pension
plans
in
accordance
with
local
conditions
and
practices.
These
pension
plans
are
classified
either
as
defined
contribution
or
defined
benefit
plans.
Defined
benefit
plans
are
funded
through
contributions
to
pension
funds
or
pension
insurance
companies.
Defined
benefit
plans
may
be
unfunded
or
wholly
or
partly
funded.
The
present
value
of
the
obligation
arising
from
the
defined
benefit
plans
is
determined
per
each
plan
using
actuarial
techniques,
the
projected
unit
credit
method.
The
Group
recognises
the
defined
benefit
obligation
,
net
of
fair
value
of
the
plan
assets
,
at
the
end
of
the
financial
period.
Actuarial
gains
and
losses
and
other
re
-measurements
of
the
net
defined
benefit
obligation
are
recognised
immediately
in
the
statement
of
other
comprehensive
income.
Current
service
cost
is
the
present
value
of
the
post-employment
benefit,
which
is
earned
by
the
employees
during
the
year.
The
Group
determines
the
net
interest
expense
on
the
net
defined
benefit
plan
by
applying
the
discount
rate
used
to
measure
the
defined
benefit
obligation.
Service
cost
is
recognised
in
employee
benefit
expenses
and
the
net
interest
in
financial
expenses.
The
defined
benefit
plans
are
calculated
by
qualified
actuaries.
In
addition
to
defined
benefit
plans,
Wärtsilä
has
other
long
-term
employee
benefits
,
which
are
presented
separately
from
the
defined
benefit
plans.
As
with
the
accounting
for
a
defined
benefit
plan,
for
any
other
long-term
benefit
the
Group
recognises
a
liability
for
the
obligation
,
net
of
the
fair
value
of
the
plan
assets,
if
any.
Changes
in
other
long
-term
employee
benefits
are
recognised
in
the
statement
of
income.
Accounting
principles
for
defined
contribution
plans
are
presented
in
Note
2.5.
Employee
benefit
expenses.
Accounting
estimates
and
judgements
Estimates
of
pension
obligations
regarding
each
defined
benefit
plan
are
based
on
actuarial
estimates
of
factors
,
including
future
salary
increases,
discount
rates,
and
return
on
plan
assets.
Changes
in
these
assumptions
can
significantly
affect
the
Group’s
pension
obligations
and
pension
costs.
MEUR
2020
2019
Net
defined
benefit
liabilities
on
31
December
139
155
Liability
for
other
long-term
employee
benefits
on
31
December
16
15
Wärtsilä
has
defined
benefit
plans
for
its
employees
mainly
in
Europe
and
Asia.
The
major
plans
are
located
in
Switzerland,
Germany,
United
Kingdom
and
Sweden.
The
Swiss
defined
benefit
plan
accounts
for
32%
of
the
Group's
total
defined
benefit
obligations
and
56%
of
the
plans'
assets.
Most
of
the
plans
provide
a
lifetime
pension
to
the
members
at
the
normal
retirement
age,
but
there
are
also
plans
that
provide
a
lump
sum
payment
at
the
retirement
date.
Most
of
these
defined
benefit
pension
plans
are
managed
by
pension
funds.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Their
assets
are
not
included
in
the
Group's
assets.
The
plans'
assets
are
typically
invested
according
to
the
investment
strategies
approved
by
the
funds'
Board
of
Trustees,
or
in
some
cases
are
completely
administered
by
insurance
companies.
Wärtsilä
Group
companies
make
their
payments
to
pension
funds
in
accordance
with
local
legislation
and
practice.
Authorised
actuaries
in
each
country
have
performed
the
actuarial
calculations
required
for
the
defined
benefit
plans.
The
Swiss
plan
Wärtsilä
operates
a
defined
benefit
plan
in
Switzerland
in
accordance
with
the
local
pension
laws
and
regulations.
The
plan
provides
benefits
to
the
members
in
the
form
of
a
pension
payable
after
retirement.
The
level
of
benefits
provided
depends
on
the
accrued
retirement
savings
capital,
which
is
a
result
of
contributions
paid
up
to
retirement
plus
respective
interest.
The
plan
is
run
as
a
pension
fund
by
the
Board
of
Trustees
separately
from
the
company.
Contributions
to
the
plan
are
paid
both
by
the
employees
,
as
well
as
by
the
employers
based
on
a
percentage
of
the
insured
salary
as
defined
in
the
pension
fund
regulations.
Contributions
by
the
employers
vary
depending
on
the
age
of
the
emp
loyee,
and
cover
on
average
two
thirds
of
the
total
contributions.
The
investment
strategy
for
a
pension
fund's
asset
is
the
responsibility
of
the
Board
of
Trustees.
Assets
are
invested
in
accordance
with
the
strategy
and
the
corridors
for
different
investment
categories
as
defined
by
local
laws.
Other
risks
of
the
plan
are
the
longevity
of
plan
members,
as
well
as
the
death
or
disability
of
employees
before
their
retirement.
The
pension
plan
is
reinsured
for
the
risk
of
death
and
disability
until
31
December
2021.
Inflationary
increases
for
pensions
in
payment
are
at
the
discretion
of
the
Board
of
Trustees
when
benefits
paid
by
the
plan
are
exceeding
the
minimum
level
required
by
law.
The
German
plans
Wärtsilä
operates
defined
benefit
plans
in
Germany
in
accordance
with
local
pension
laws
and
regulations.
The
plans
provide
benefits
to
the
members
in
the
form
of
a
pension
payable
after
retirement.
The
level
of
benefits
provided
depends
on
the
accrued
retirement
savings
capital,
which
is
a
result
of
contributions
paid
up
to
retirement
plus
respective
interest.
The
plans
vary
from
unfunded
plans
,
to
a
plan
run
as
a
pension
fund.
In
some
of
the
plans,
contributions
are
paid
to
the
plan
,
both
by
the
employees
and
the
employers
based
on
a
percentage
of
the
insured
salary
as
defined
in
the
pension
fund
regulations.
However,
in
some
plans
only
the
employer
is
obliged
to
make
the
payments.
Contributions
by
the
employers
vary
depending
on
the
age
of
the
employee,
the
duration
of
the
employment
,
and
also
on
the
positi
on
of
the
employee.
The
main
risks
of
the
plans
are
the
longevity
of
plan
members
,
and
the
death
or
disability
of
employees
before
their
retirement.
In
a
funded
plan,
the
investment
strategy
chosen
also
includes
certain
risk.
Inflationary
increases
for
pensions
in
payment
are
valuated
on
a
yearly
basis.
MEUR
2020
2019
Present
value
of
unfunded
defined
benefit
obligations
111
119
Present
value
of
funded
defined
benefit
obligations
180
182
Fair
value
of
plan
assets
-151
-146
Net
liability
in
the
statement
of
financial
position
139
155
%
Present
value
of
defined
benefit
obligations
Fair
value
of
plan
assets
Switzerland
32
56
Germany
19
0
Other
Europe
39
32
Asia
9
12
Total
100
100
MEUR
Present
value
of
defined
benefit
obligation
Fair
value
of
plan
assets
Net
defined
benefit
liability
Balance
on
1
January
2019
282
-134
149
Changes
in
exchange
rates
5
-4
Recognised
in
the
statement
of
income:
Current
service
cost
13
13
Gains
(-)
/
losses
(+)
on
curtailments
and
settlements
-1
-1
Interest
cost
(+)
/
interest
income
(-)
5
-2
3
Remeasurements
recognised
in
other
comprehensive
income:
Return
on
plan
assets,
excluding
interest
income
-11
-11
Experience
adjustments
1
1
Changes
in
demographic
assumptions
-1
-1
Changes
in
financial
assumptions
30
30
Contribution
paid
by
the
plan
members
1
-1
Contribution
paid
by
the
employer
-10
-10
Benefits
paid
-21
10
-12
Reclassification
to
assets
held
for
sale
-15
7
-8
Balance
on
31
December
2019
299
-146
155
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Balance
on
1
January
2020
299
-146
155
Changes
in
exchange
rates
-2
2
0
Recognised
in
the
statement
of
income:
Current
service
cost
10
10
Past
service
cost
(-
credit)
1
1
Gains
(-)
/
losses
(+)
on
curtailments
and
settlements
1
1
Interest
cost
(+)
/
interest
income
(-)
3
-2
2
Remeasurements
recognised
in
other
comprehensive
income:
Return
on
plan
assets,
excluding
interest
income
-6
-6
Experience
adjustments
-4
-4
Changes
in
financial
assumptions
5
5
Contribution
paid
by
the
plan
members
1
-1
0
Contribution
paid
by
the
employer
-8
-8
Benefits
paid
-22
9
-14
Reclassification
to
assets
held
for
sale
-2
-2
Balance
on
31
December
2020
290
-151
139
Plan
assets
invested
in:
%
2020
2019
Shares
and
other
equity
instruments
18
18
Bonds
and
other
debt
instruments
39
35
Property
17
17
Other
assets
26
30
The
main
actuarial
assumptions
at
the
end
of
the
financial
period
are
(expressed
as
weighted
averages):
%
2020
2019
Discount
rate
1.00
1.08
Future
salary
growth
2.01
2.03
Future
pension
growth
1.00
1.14
On
31
December
2020,
the
weighted
average
duration
of
the
defined
benefit
obligation
was
8
years
(12).
The
Group
expects
to
contribute
EUR
3
million
(7)
to
the
plans
during
the
next
financial
period.
Assumptions
regarding
future
mortality
are
set
based
on
actuarial
advice
in
accordance
with
the
published
statistics
and
experience
in
each
country.
These
assumptions
translate
into
a
weighted
average
life
expectancy
in
years
for
a
pensioner
at
the
retirement
age
as
follows:
2020
2019
Plan
participants
retiring
at
the
end
of
the
financial
period:
Male
17.3
17.4
Female
19.8
20.0
Plan
participants
retiring
20
years
after
the
end
of
the
financial
period:
Male
17.0
18.4
Female
19.1
20.4
The
following
table
presents
a
sensitivity
analysis
for
each
significant
actuarial
assumption
showing
how
the
defined
benefit
obligation
would
have
been
affected
by
changes
in
the
relevant
actuarial
assumption
that
were
reasonably
possible
at
the
end
of
the
financial
period.
This
sensitivity
analysis
applies
to
the
defined
benefit
obligation
only
and
not
to
the
net
defined
benefit
pension
liability
in
its
entirety.
Sensitivity
analysis
Effect
to
defined
benefit
obligation,
MEUR
Change
in
assumption
2020
2019
Discount
rate
increase
1%
-37
-41
Discount
rate
decrease
1%
48
51
Future
salary
growth
increase
1%
8
10
Future
salary
growth
decrease
1%
-7
-8
Future
pension
growth
increase
1%
29
30
Future
pension
growth
decrease
1%
-15
-16
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
5.
CAPITAL
STRUCTURE
AND
FINANCIAL
ITEMS
5.1.
FINANCIAL
INCOME
AND
EXPENSES
Accounting
principles
Service
cost
related
to
pension
plans
is
recognised
in
employee
benefit
expenses
and
the
net
interest
in
financial
expenses.
Also
,
gains
and
losses
from
fair
valuation
and
disposal
and
impairments
of
other
shares
are
included
in
financial
income
and
expenses.
Changes
in
the
fair
value
of
interest
rate
hedges
against
Wärtsilä
Group’s
loan
portfolio
are
immediately
recognised
in
financial
income
or
expenses
in
the
statement
of
income.
The
fair
value
of
interest
rate
swaps
is
calculated
by
discounting
the
future
cash
flows.
Exchange
rate
differences
related
to
financial
assets
and
financial
liabilities
are
reported
as
financial
items
in
the
statement
of
income,
except
exchange
rate
differences
related
to
non
-current
debt
that
is
part
of
the
Group's
net
investment
in
a
subsidiary.
MEUR
2020
2019
Interest
income
on
loans
and
receivables
3
1
Interest
income
on
financial
assets
at
fair
value
through
the
statement
of
income
12
23
Interest
income
on
investments
at
amortised
cost
1
2
Other
financial
income
0
1
Total
financial
income
16
27
Interest
expenses
on
financial
liabilities
recognised
at
amortised
cost
-9
-10
Interest
expenses
on
lease
liabilities
recognised
at
amortised
cost
-4
-5
Interest
expenses
on
financial
liabilities
at
fair
value
through
the
statement
of
income
-21
-36
Net
interest
from
defined
benefit
plans
-2
-3
Changes
in
fair
values
of
financial
assets/liabilities
at
fair
value
through
the
statement
of
income
0
-5
Exchange
rate
differences*
-16
-10
Fee
expenses
-2
-2
Other
financial
expenses
-4
-4
Total
financial
expenses
-59
-74
Total
-43
-47
*
In
2020,
the
result
from
the
ineffective
portion
of
cash
flow
hedges
related
to
cancelled
projects
,
EUR
-1
million
(-5),
and
exchange
rate
differences
from
unhedged
internal
loans,
EUR
-10
million
(
-8)
were
included
in
exchange
rate
differences.
5.2.
FINANCIAL
ASSETS
AND
LIABILITIES
BY
MEASUREMENT
CATEGORY
Accounting
principles
Financial
instruments
Financial
instruments
are
initially
recognised
at
fair
value.
Subsequently,
financial
assets
are
classified
and
measured
at
amortised
cost,
at
fair
value
through
statement
of
income,
or
at
fair
value
through
other
comprehensive
income.
The
classification
of
financial
assets
is
defined
by
the
business
model
and
the
cash
flow
characteristics
of
the
asset.
Financial
liabilities
are
subsequently
classified
and
measured
at
amortised
cost
or
at
fair
value
through
statement
of
income.
Financial
instruments
are
classified
as
current
financial
instruments
unless
the
maturity
of
the
financial
instrument
exceeds
12
months
from
the
reporting
date.
Financial
instruments
are
derecognised
only
when
the
financial
instrument
is
extinguished,
or
when
the
contractually
specified
right
or
obligation
is
discharged,
cancelled,
or
when
it
expires.
The
status
of
financial
instruments
is
evaluated
at
each
reporting
date.
Financial
instruments
at
amortised
cost
Financial
assets
Financial
assets
measured
at
amortised
cost
include
cash
and
cash
equivalents,
investments
in
debt
instruments,
commercial
papers,
trade
receivables
and
other
receivables.
The
assets
are
initially
recognised
at
fair
value
less
the
transaction
costs,
and
are
subsequently
measured
at
amortised
cost
by
using
the
effective
interest
rate
method.
These
assets
are
held
for
collecting
contractual
cash
flows,
which
are
solely
payments
of
principal
and
interest.
Interest
income
is
recognised
as
financial
income
in
the
statement
of
income.
The
Group
applies
the
simplified
method
in
IFRS
9
for
the
expected
credit
losses
from
its
trade
receivables.
This
requires
expected
lifetime
credit
losses
to
be
recognised
from
the
initial
recognition
of
the
receivables,
as
defined
in
Note
4.2.
Trade
receivables
and
contract
assets
and
liabilities.
Financial
Liabilities
Financial
liabilities
measured
at
amortised
cost
include
trade
and
other
payables,
loans,
and
borrowings.
These
liabilities
are
initially
recognised
at
fair
value
less
the
transaction
costs
related
to
the
acquisition
of
these
liabilities.
The
liabilities
are
subsequently
classified
and
measured
using
the
effective
interest
rate
method
by
amortising
the
discounted
interest
payments
over
the
maturity
of
the
liabilities.
Interest
expense
is
recognised
in
the
financial
expense
in
the
statement
of
income.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Financial
in
struments
at
fair
value
through
the
statement
of
income
Financial
assets
Financial
assets
measured
at
fair
value
through
the
statement
of
income
include
other
financial
investments,
other
short-term
cash
investments
and
derivatives,
which
are
not
included
in
the
hedge
accounting.
These
financial
investments
include
Wärtsilä’s
investments
in
other
companies
(both
listed
and
unlisted
shares).
Changes
in
fair
value
and
gains
and
losses
at
derecognition
of
these
financial
assets
are
recognised
in
the
statement
of
income.
Gains
and
losses
from
fair
valuation
and
the
disposal
and
impairments
of
shares
that
are
attributable
to
operating
activities
are
included
in
operating
income,
while
gains
and
losses
from
fair
valuation
and
the
disposal
and
impairments
of
other
shares
are
included
in
financial
income
and
expenses.
Financial
liabilities
Financial
liabilities
recognised
at
fair
value
through
the
statement
of
income
include
derivatives
that
are
not
eligible
for
hedge
accounting.
Changes
in
fair
value
and
gains
and
losses
at
derecognition
of
these
financial
assets
are
recognised
in
the
statement
of
income.
Financial
Instruments
at
fair
value
through
other
comprehensive
income
Financial
assets
and
liabilities
recognised
at
fair
value
through
other
comprehensive
income
include
the
effective
portion
of
derivates
eligible
for
hedge
accounting.
Information
on
measurement
categories
of
derivatives
and
financial
instruments
in
hedge
accounting
are
presented
in
Note
5.7.
Derivative
financial
instruments.
2020
MEUR
Measured
at
amortised
cost
At
fair
value
through
the
statement
of
income
At
fair
value
through
other
compre
-
hensive
income
Carrying
amounts
of
the
statement
of
financial
position
items
Fair
value
Non
-current
financial
assets
Interest
-bearing
investments
1
1
1
Trade
receivables
30
30
30
Derivatives
1
1
1
Other
investments
19
19
19
Other
receivables
2
2
2
Current
financial
assets
Trade
receivables
920
920
920
Trade
receivables
for
sale
2
2
2
Derivatives
15
22
37
37
Other
financial
receivables
4
4
4
Cash
and
cash
equivalents
652*
265
919
919
Carrying
amount
by
measurement
category
1,608
302
22
1,934
1,934
Non
-current
financial
liabilities
Interest
-bearing
debt
1,129
1,129
1,139
Derivatives
19
6
25
25
Current
financial
liabilities
Interest
-bearing
debt
198
198
198
Trade
payables
411
411
411
Derivatives
1
2
3
3
Other
financial
liabilities
4
4
4
Carrying
amount
by
measurement
category
1,743
20
8
1,770
1,780
*
In
addition,
the
Group
has
cash
and
cash
equivalents
measured
at
amortised
cost
of
EUR
14
million
related
to
assets
held
for
sale.
2019
MEUR
Measured
at
amortised
cost
At
fair
value
through
the
statement
of
income
At
fair
value
through
other
compre
-
hensive
income
Carrying
amounts
of
the
statement
of
financial
position
items
Fair
value
Non
-current
financial
assets
Interest
-bearing
investments
1
1
1
Trade
receivables
19
19
19
Derivatives
5
5
5
Other
investments
18
18
18
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Other
receivables
2
2
2
Current
financial
assets
Trade
receivables
1,232
1,232
1,232
Trade
receivables
for
sale
4
4
4
Derivatives
5
14
18
18
Other
financial
receivables
6
6
6
Cash
and
cash
equivalents
343*
15
358
358
Carrying
amount
by
measurement
category
1,600
48
14
1,662
1,662
Non
-current
financial
liabilities
Interest
-bearing
debt
997
997
1,005
Derivatives
14
2
16
16
Current
financial
liabilities
Interest
-bearing
debt
99
99
99
Trade
payables
624
624
624
Derivatives
1
6
7
7
Other
financial
liabilities
4
4
4
Carrying
amount
by
measurement
category
1,724
15
8
1,747
1,756
*
In
addition,
the
Group
has
cash
and
cash
equivalents
measured
at
amortised
cost
of
EUR
11
million
related
to
assets
held
for
sale.
Fair
value
hierarchy
Accounting
principles
Wärtsilä
uses
the
following
categorisation
for
determining
and
disclosing
the
fair
value
of
financial
instruments
by
valuation
technique:
Level
1:
The
quoted
prices
for
the
financial
instruments
are
directly
and
regularly
available
on
active
publicly
traded
markets
or
other
publicly
available
sources.
Level
2:
The
prices
for
the
financial
instruments
are
determined
by
using
a
valuation
method
for
which
the
input
data
is
directly
or
indirectly
available
on
a
publicly
traded
markets
or
other
publicly
available
sources.
Level
3:
The
financial
instruments
are
categorised
into
level
3
fair
value
if
the
prices
for
the
inputs
of
the
valuation
method
are
not
publicly
available,
and
when
the
financial
instruments
are
measured
using
an
independent
valuation
method.
Specific
valuation
techniques
used
to
value
financial
instruments
include:
•
the
fair
value
of
forward
foreign
exchange
contracts
is
determined
by
using
forward
rates
at
the
closing
date
•
the
fair
value
of
interest
rate
swaps
is
calculated
as
being
the
present
value
of
the
estimated
future
cash
flows
based
on
observable
yield
curves
•
the
use
of
quoted
market
prices
or
dealer
quotes
for
similar
instruments
2020
2019
MEUR
Level
2
Level
3
Level
2
Level
3
Financial
assets
Other
investments
19
18
Interest
-bearing
investments,
non-current
1
1
Other
receivables,
non-current
2
2
Derivatives
37
24
Financial
liabilities
Interest
-bearing
debt,
non-current*
1,139
1,005
Derivatives
27
23
*
Measured
at
amortised
cost
in
the
statement
of
financial
position.
Additional
information
on
financial
liabilities
is
presented
in
Note
5.6.
Maturity
analysis
of
financial
liabilities.
Other
investments
Other
investments
include
unlisted
shares
carried
at
fair
value.
These
investments
are
valued
using
certain
DCF
models
where
critical
assumptions
relate
to
WACC
level
and
expected
cash
flows
from
future
dividends.
However,
the
results
from
different
scenarios
vary
a
lot.
The
management
therefore
considers
that
the
valuation
at
amortised
cost
is
the
best
estimate
of
fair
value.
MEUR
2020
2019
Carrying
amount
on
1
January
18
16
Acquired
shares
1
2
Carrying
amount
on
31
December
19
18
In
2020,
the
cost
for
other
unlisted
shares
(level
3)
was
EUR
19
million
(18),
and
the
market
value
of
them
was
EUR
19
million
(18).
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
5.3.
CASH
AND
CASH
EQUIVALENTS
Accounting
principles
Cash
and
cash
equivalents
comprise
cash
in
hand,
deposits
held
at
cal
l
with
banks,
and
other
short
-term
cash
investments.
Other
short-term
cash
investments
are
highly
liquid
investments
that
are
subject
to
only
minor
fluctuations
in
value,
and
which
have
a
maturity
of
up
to
three
months
on
the
date
of
acquisition.
Cash
in
hand
and
deposits
held
at
call
are
presented
at
amortised
cost.
Other
cash
investments
are
mainly
measured
at
fair
value,
except
for
commercial
paper
investments
that
are
presented
at
amortised
cost.
Credit
accounts
related
to
Group
cash
pool
accounts
are
included
in
current
financial
liabilities.
MEUR
2020
2019
Cash
and
bank
balances*
628
343
Cash
equivalents
290
15
Total
919
358
*
EUR
175
million
(171)
of
cash
and
bank
balances
relate
to
cash
in
countries
where
repatriation
is
limited
due
to
local
regulation
and,
consequently
,
the
cash
is
not
immediately
available
to
the
parent
company.
In
addition,
the
Group
has
cash
and
cash
equivalents
of
EUR
14
million
(11)
related
to
assets
held
for
sale.
5.4.
NET
DEBT
RECONCILIATION
Net
interest
-bearing
debt
MEUR
2020
2019
Interest
-bearing
debt,
non-current
1,005
851
Lease
liabilities,
non-current
124
146
Interest
-bearing
debt,
current
156
58
Lease
liabilities,
current
42
42
Total
interest
-bearing
liabilities
1,327
1,096
Interest
-bearing
receivables
-1
-1
Cash
and
cash
equivalents
-919
-358
Cash
and
cash
equivalents
pertaining
to
assets
held
for
sale
-14
-11
Total
interest
-bearing
assets
-933
-370
Total
net
interest
-bearing
debt
394
726
Net
debt
reconciliation
2020
MEUR
Carrying
amount
on
1
January
2020
Cash
flows
Changes
in
exchange
rates
Other
non
-cash
movements
Acquistions
and
disposals
Carrying
amount
on
31
December
2020
Interest
-bearing
debt,
non-current
851
155
1,005
Interest
-bearing
debt,
current
58
121
-14
-8
156
Lease
liabilities
188
-49
-6
34
-1
166
Interest
-bearing
receivables
-1
1
-1
Cash
and
cash
equivalents*
-369
-601
22
16
-932
Net
debt
726
-374
3
34
8
394
*
Includes
cash
and
cash
equivalents
pertaining
to
assets
held
for
sale.
2019
MEUR
Carrying
amount
on
1
January
2019
Cash
flows
Changes
in
exchange
rates
Other
non
-cash
movements
Carrying
amount
on
31
December
2019
Interest
-bearing
debt,
non-current
746
104
851
Interest
-bearing
debt,
current
73
-11
-5
58
Lease
liabilities
215
-52
26
188
Interest
-bearing
receivables
-3
2
-1
Cash
and
cash
equivalents
-487
119
-369*
Net
debt
545
162
-5
26
726
*
Includes
cash
and
cash
equivalents
pertaining
to
assets
held
for
sale.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
5.5.
EQUITY
Equity
consists
of
share
capital,
share
premium,
translation
differences,
fair
value
reserve,
remeasurements
of
defined
benefit
liabilities
and
retained
earnings.
Share
capital
and
number
of
shares
MEUR
Share
capital
Number
of
shares
and
votes
Share
capital
Share
premium
Total
1
January
2019
591,723,390
336
61
397
31
December
2019
591,723,390
336
61
397
31
December
2020
591,723,390
336
61
397
Wärtsilä's
share
does
not
have
a
nominal
value.
Wärtsilä
has
one
series
of
shares.
Each
share
is
assigned
one
vote
in
the
Annual
General
Meeting
and
has
an
equal
right
to
dividend.
Share
Capital
The
subscription
price
of
a
share
received
by
the
company
in
connection
with
share
issues
is
credited
to
the
share
capital,
unless
it
is
provided
in
the
share
issue
decision
that
a
part
of
the
subscription
price
is
to
be
recorded
in
the
fund
for
invested
non-
restricted
equity.
Share
Premium
Share
premium
is
restricted
equity.
It
may
be
reduced
in
accordance
with
the
rules
applying
to
decreasing
share
capital
in
accordance
with
the
Finnish
Limited
Liability
Companies
Act.
It
can
also
be
used
to
increase
the
share
capital.
Translation
differences
Translating
foreign
subsidiaries'
financial
statements
by
using
different
exchange
rates
in
the
statement
of
comprehensive
income
and
in
the
statement
of
financial
position
causes
translation
differences,
which
are
recognised
in
equity.
Translation
differences
of
foreign
subsidiaries’
acquisition
cost
eliminations
and
pos
t-
acquisition
gains
and
losses
are
also
presented
in
equity.
Also
,
translation
differences
arising
from
subsidiary
net
investment
s
and
non-current
subsidiary
loans
without
agreed
settlement
dates
are
presented
in
equity.
The
change
in
translation
differences
is
recognised
in
other
comprehensive
income.
Fair
value
reserve
Fair
value
reserve
includes
the
changes
in
fair
value
of
derivative
financial
instruments,
if
the
hedging
is
effective
and
eligible
for
hedge
accounting.
The
changes
in
items
included
in
fair
value
reserve
are
recognised
in
other
comprehensive
income.
In
2020,
EUR
-4
million
(4)
of
fair
value
adjustments
related
to
cash
flow
hedges
was
recognised
in
equity.
EUR
6
million
(19)
of
the
fair
value
adjustments
was
transferred
from
equity
to
the
statement
of
income
as
net
sales
or
operating
expenses
during
2020.
MEUR
Ca
sh
flow
hedges
Fair
value
reserve
on
1
January
2019
-39
Taxes
related
to
fair
value
adjustments
8
Fair
value
reserve
on
1
January
2019
-31
Transferred
to
the
statement
of
income,
net
of
taxes
16
Fair
value
adjustments
4
Fair
value
reserve
on
31
December
2019
-11
Transferred
to
the
statement
of
income,
net
of
taxes
5
Fair
value
adjustments
-4
Taxes
related
to
fair
value
adjustments
1
Fair
value
reserve
on
31
December
2020
-9
Parent
company's
distributable
funds
Accounting
principles
The
dividend
proposed
by
the
Board
of
Directors
is
deducted
from
distributable
equity
when
approved
by
the
company’s
Annual
General
Meeting.
Unpaid
dividends
are
presented
as
liability
in
the
consolidated
financial
statements.
After
the
balance
sheet
date,
the
Board
of
Directors
proposed
that
a
dividend
of
EUR
0.20
per
share
be
paid
for
the
financial
period
2020,
the
total
dividend
payable
being
EUR
118
million.
The
remaining
part
of
the
retained
profits
will
be
carried
further
in
the
unrestricted
equity.
For
the
profit
for
the
financial
period
2019,
a
dividend
of
EUR
0.48
per
share
was
distributed,
totalling
EUR
284
million,
and
the
rest
of
the
retained
profits
were
carried
further
in
the
unrestricted
equity.
Additional
information
on
equity
is
presented
in
Notes
to
the
parent
company
financial
statements,
in
Note
10.
Shareholders'
equity.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
5.6.
MATURITY
ANALYSIS
OF
FINANCIAL
LIABILITIES
2020
Current
Non
-current
MEUR
<
1
year
1–3
years
3–5
years
>
5
years
Total
Loans
from
other
financial
institutions*
155
481
232
292
1,160
Lease
liabilities
45
59
35
51
190
Other
interest
-bearing
debt*
1
0
0
0
1
Trade
payables
411
411
Derivatives**
13
5
2
7
27
Other
liabilities
4
4
Total
629
545
270
350
1,794
*
Estimated
interest
expenses,
total
8
11
6
2
28
Estimated
contractual
cash
flows
637
557
276
353
1,822
2019
Current
Non
-current
MEUR
<
1
year
1–3
years
3–5
years
>
5
years
Total
Loans
from
other
financial
institutions*
56
263
258
328
906
Lease
liabilities
48
65
37
64
215
Other
interest
-bearing
debt*
2
2
Trade
payables
624
624
Derivatives**
7
10
5
2
23
Other
liabilities
4
4
Total
741
339
301
392
1,774
*
Estimated
interest
expenses,
total
8
12
8
3
31
Estimated
contractual
cash
flows
748
351
309
395
1,804
**
Valuation
for
derivatives
with
negative
market
value
by
maturity
date.
Nominal
contractual
amounts
are
presented
in
Note
5.7.
Derivative
financial
instruments.
Interest
expenses
for
long-term
loans
are
calculated
by
using
the
average
interest
rate
prevailing
on
31
December
2020.
Fair
values
of
financial
liabilities
are
presented
in
Note
5.2.
Financial
assets
and
liabilities
by
measurement
category.
Information
on
measurement
categories
of
financial
liabilities
in
Note
5.2.
Financial
assets
and
liabilities
by
measurement
category.
5.7.
DERIVATIVE
FINANCIAL
INSTRUMENTS
Accounting
principles
Derivatives
and
hedge
accounting
Derivatives
are
initially
recognised
on
the
statement
of
financial
position
at
fair
value
and
are
subsequently
classified
and
measured
at
their
fair
value
at
the
end
of
each
reporting
period.
Gains
and
losses
from
the
fair
value
measurement
are
recognised
in
the
statement
of
income
as
determined
by
the
purpose
of
the
derivatives.
Hedge
accounting
Wärtsilä
hedges
its
sales
and
purchases
in
foreign
currencies
with
foreign
exchange
forwards
or
currency
options,
and
Wärtsilä
applies
hedge
accounting
according
to
IFRS
9
to
the
majority
of
these
foreign
exchange
forwards.
Forward
points
are
excluded
from
the
hedge
relationship,
and
in
case
of
a
hedge
being
fully
or
partially
ineffective,
the
ineffective
portion
is
immediately
recognised
in
the
financial
items
for
the
reporting
period.
Wärtsilä
may
also
apply
c
ash
flow
hedging
to
some
of
its
interest
rate
derivatives.
The
Group
documents
the
relationship
between
each
hedging
instrument
and
the
hedged
item
upon
entering
into
a
hedging
arrangement,
along
with
the
risk
management
objective
and
the
strategy
applied.
Through
this
process,
the
hedging
instrument
is
linked
to
the
relevant
assets
and
liabilities,
projected
business
transactions
,
or
binding
contracts.
Wärtsilä
designates
its
hedge
relationships
of
foreign
exchange
hedges
as
either
hedges
of
highly
probable
forecast
transactions
or
firm
commitments.
The
Group
uses
a
hedge
designation
for
foreign
exchange
hedging,
where
critical
terms
match
or
are
closely
aligned
between
the
hedging
instrument
and
the
hedged
item.
The
hedge
ratio
is
typically
100%.
Since
underlying
risks
match,
hedging
instruments
are
considered
to
offset
any
changes
related
to
the
hedged
transactions.
Wärtsilä
recognises
that
potential
sources
of
ineffectiveness
arise
when
hedged
transactions
are
delayed
or
cancelled.
However,
Wärtsilä
applies
a
roll-forward
strategy
where
derivatives
are
roll
-forwarded
or
terminated
early
to
match
these
underlying
transactions.
Hedge
effectiveness
requirements
are
assessed
in
accordance
with
IFRS
9
requirements
,
including
requirements
for
economic
relationship,
credit
risk
and
hedge
ratio.
External
hedges
are
typically
made
for
short
maturities
(up
to
1
year)
and
only
high
credit
quality
(A-
minimum
rating
requirement)
counterparties
are
utilised
.
Counterparty
credit
risk
is
expected
to
have
minimal
effect
on
hedge
valuations.
Due
to
some
underlying
hedged
cash
flows
having
longer
maturities
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
than
related
hedges,
the
changes
in
present
value
of
the
hedge
and
the
underlying
cash
flow
do
not
always
fully
offset
each
other
during
the
lifetime
of
a
hedge.
This
ineffectiveness
is
calculated
on
a
quarterly
basis
and
booked
in
financial
items
at
Group
level.
Cash
flow
hedge
Changes
in
the
fair
value
of
derivative
contracts
designated
and
qualifying
as
cash
flow
hedges
are
recognised
in
other
comprehensive
income
and
presented
in
the
fair
value
reserve
in
equity,
provided
that
the
hedging
is
effective.
In
the
case
of
foreign
exchange
forwards,
the
spot
element
is
included
for
the
hedging
relationship
where
forward
points
have
been
excluded
from
the
hedge
designation.
Any
gain
or
loss
in
the
fair
value
reserve
related
to
derivatives
accumulated
through
other
comprehensive
income
is
reported
in
the
statement
of
income
in
the
same
period
as
any
transactions
relating
to
the
hedged
obligations
or
estimates,
for
example
as
an
adjustment
to
net
sales
or
material
and
services.
The
ineffective
portion
is
immediately
recognised
in
the
financial
items
in
the
statement
of
income
for
the
reporting
period.
Changes
in
fair
value
of
foreign
exchange
derivatives
due
to
interest
rate
differences
are
recognised
in
the
statement
of
income.
More
information
on
fair
value
adjustments
related
to
cash
flow
hedges
is
presented
in
Note
5.5.
Equity,
and
more
information
on
the
ineffective
portion
of
cash
flow
hedges
is
presented
in
Note
5.1.
Financial
income
and
expenses.
The
Group
applies
hedge
accounting
to
the
majority
of
its
foreign
currency
forward
contracts.
The
open
operative
currency
positions
including
financing
are
hedged
by
using
derivative
financial
instruments
according
to
the
table
below.
Foreign
exchange
forwards
2020
2019
MEUR
Net
against
fixed
sales
and
purchase
contracts
Against
net
loans
Net
against
fixed
sales
and
purchase
contracts
Against
net
loans
Currency
forwards
USD
292
287
614
356
NOK
396
1
451
41
CHF
22
61
31
103
CNY
15
12
107
13
AUD
47
1
52
MXN
46
5
47
2
SGD
11
8
31
SEK
25
1
26
CAD
20
11
13
11
Other
currencies*
120
1
67
7
Total
net
amount
of
currency
derivatives
936
437
1,364
616
*
Other
currencies
do
not
include
any
material
single
currencies.
Net
loans
include
non-euro
intragroup
loans
and
deposits
given
by
the
parent
company.
IFRS
hedge
accounting
has
been
applied
to
EUR
1,861
million
(2,448)
currency
forwards.
A
5%
change
in
the
exchange
rates
would
cause
from
these
currency
forwards
an
approximately
EUR
45
million
(74)
impact
on
the
equity.
As
all
material
fixed
sales
and
purchase
contracts
are
hedged,
the
profit
and
loss
sensitivity
of
foreign
exchange
from
operations
(excluding
internal
financing)
is
considered
minimal.
2020
2019
MEUR
Gross
amount
Net
amount
Equity
impact
Gross
amount
Net
amount
Equity
impact
Both
legs
of
currency
forwards
under
hedge
accounting*
EUR
1,424
123
6
1,772
83
USD
1,077
295
15
1,332
640
32
NOK
803
248
12
1,202
509
25
GBP
79
57
3
128
34
2
MXN
128
46
2
132
47
2
CNY
50
40
2
110
104
5
JPY
26
2
50
31
2
CHF
18
8
38
28
1
Other
currencies
116
81
4
108
74
4
Total
(single
leg)
1,861
900
45
2,435
776
73
*
Intragroup
transactions,
on
which
the
actual
hedge
accounting
bookings
are
based.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
MEUR
2020
2019
External
currency
forwards
under
hedge
accounting
by
year
2020
-
1,769
2021
1,010
-
Hedged
highly
probable
forecasted
cash
flows
by
year
2020
-
1,977
2021
1,341
193
2022
233
71
2023
50
31
2024
45
176*
2025-
192
-
*
Includes
2024
and
later
for
comparison
period.
Derivatives
MEUR
2020
of
which
closed
2019
of
which
closed
Nominal
values
of
derivative
financial
instruments
(level
2)
Interest
rate
swaps
450
400
Cross
currency
swaps
237
246
Currency
forwards,
included
in
hedge
accounting
1,010
558
1,769
873
Currency
forwards,
no
hedge
accounting
650
245
597
213
Total
2,347
803
3,012
1,086
Fair
values
of
derivative
financial
instruments
(level
2)
Interest
rate
swaps
-12
-7
Cross
currency
swaps
-12
-4
Currency
forwards,
included
in
hedge
accounting
21
8
Currency
forwards,
no
hedge
accounting
14
4
Total
10
In
addition,
the
Group
had
copper
futures
and
swaps
amounting
to
113
tons
(173)
valued
at
EUR
1
million
(1).
Foreign
currency
forward
contracts
are
against
transactional
risks
and
fall
due
during
the
following
12
months
(12).
A
currency
forward
is
considered
closed
when
there
are
offsetting
cash
flows
in
the
same
currency
with
the
same
value
date.
Interest
rate
swaps
are
denominated
in
euros
and
their
average
maturity
is
59
months
(69).
The
average
maturity
for
cross
currency
swaps
is
30
months
(41).
Changes
in
the
market
value
of
interest
rate
derivatives
are
usually
immediately
recognised
in
the
statement
of
income.
However,
cash
flow
hedge
accounting
in
accordance
with
IFRS
9
is
applied
to
a
EUR
130
million
(130)
amortising
interest
rate
swap
maturing
in
2031.
The
interest
rate
hedge
swaps
variable
interest
payments
of
a
large
lease
agreement
,
to
fixed
interest
payments.
As
the
hedge
and
the
underlying
cash
flow
have
matching
critical
terms,
the
hedge
ratio
is
1:1
and
the
hedge
is
expected
to
be
100%
effective.
In
2020,
a
EUR
-6
million
(2)
fair
value
adjustment
related
to
cash
flow
hedge
was
recognised
in
equit
y
,
and
no
amounts
have
been
reclassified
to
profit
and
loss.
Wärtsilä
does
not
see
any
significant
increase
in
counterparty
credit
risk
to
outstanding
derivatives
due
to
COVID-
19
pandemic,
as
only
high
credit
quality
counterparties
have
been
used.
Derivatives
under
hedge
accounting
are
expected
to
remain
effective,
as
there
has
been
no
significant
increase
in
the
cancellations
of
orders.
The
hedged
cash
flows
are
still
considered
to
be
highly
probable.
Normally
all
of
the
Groups'
derivatives
are
carried
out
according
to
International
Swaps
and
Derivatives
Association's
Master
Agreements
(ISDA).
In
case
of
an
event
of
default
under
these
agreements,
the
non-
defaulting
party
may
request
early
termination
and
set
-off
of
all
outstanding
transactions.
These
agreements
do
not
meet
the
criteria
for
offsetting
in
the
statement
of
financial
position.
The
following
table
sets
out
the
carrying
amounts
of
recognised
financial
instruments
that
are
subject
to
the
above
agreements.
MEUR
2020
2019
Gross
fair
values
of
derivative
financial
instruments
subject
to
ISDAs
Assets
Cross
currency
swaps
1
5
Currency
forwards
37
18
Total
37
24
Liabilities
Interest
rate
swaps
-12
-7
Cross
currency
swaps
-13
-9
Currency
forwards
-3
-7
Total
-27
-23
Net
fair
values
of
derivative
financial
instruments
subject
to
ISDAs
Assets
25
8
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Liabilities
-16
-8
Total
10
5.8.
FINANCIAL
RISKS
General
Wärtsilä
has
a
centralised
Group
Treasury,
which
has
two
main
objectives:
1)
to
arrange
adequate
funding
for
the
Group’s
underlying
operations
on
competitive
terms
and
2)
to
identify
and
evaluate
the
financial
risks
within
the
Group
and
implement
the
hedges
for
the
Group
companies.
The
objective
is
to
hedge
against
unfavourable
changes
in
the
financial
markets
and
to
minimise
the
impact
of
foreign
exchange,
interest
rate,
credit,
and
liquidity
risks
on
the
Group’s
cash
reserves,
profits
,
and
shareholder
equity.
The
Financial
Risk
Policy
is
approved
by
the
Board
of
Directors.
The
Group
Treasury
employs
only
such
instruments
whose
market
value
and
risk
profile
it
can
reliably
monitor.
Foreign
exchange
risk
Foreign
exchange
exposures
are
monitored
at
the
Business
level,
hedged
at
company
level
against
the
Group
Treasury
,
and
then
netted
and
covered
externally
at
Group
level
by
the
Group
Treasury.
All
material
fixed
sales
and
purchase
contracts,
including
both
future
cash
flows
and
related
accounts
receivable
and
payable,
are
hedged.
The
estimated
future
commercial
exposures
are
evaluated
by
the
Businesses,
and
the
level
of
hedging
is
decided
by
the
Board
of
Management.
Hedge
accounting
in
accordance
with
IFRS
9
is
applied
to
most
of
the
hedges
of
these
exposures.
The
hedges
cover
such
time
periods
that
both
the
prices
and
costs
can
be
adjusted
to
new
exchange
rates.
These
periods
vary
among
Group
companies
from
one
month
to
two
years.
The
Group
also
hedges
its
position
of
the
statement
of
financial
position,
which
includes
cash
balances,
loans/deposits
,
as
well
as
other
receivables
and
payables
denominated
in
foreign
currencies.
As
field
service
work
is
invoiced
in
local
currencies,
there
is
some
foreign
exchange
change
related
volatility
in
the
consolidated
net
sales
.
However,
the
effect
on
the
profitability
is
limited
as
the
related
costs
are
in
the
same
currency.
Spare
part
sal
es
are
based
on
a
euro
price
list
and
related
purchases
in
non-euro
currencies
are
hedged,
so
the
effect
from
foreign
currency
rate
changes
on
spare
part
sales
is
minimal.
As
project/hardware
sales/purchases
,
as
well
as
estimated
currency
exposures
from
long-term
agreements
,
are
hedged,
the
Group
does
not
expect
significant
gains/losses
from
foreign
exchange
rate
changes
in
2021
related
to
its
operations,
excluding
internal
financing.
The
instruments,
and
their
nominal
values,
used
to
hedge
the
Group’s
foreign
exchange
exposures
are
listed
in
Note
5.7.
Derivative
financial
instruments.
Since
Wärtsilä
has
subsidiaries
and
joint
ventures
outside
the
euro
zone,
the
Group’s
equity,
goodwill
and
purchase
price
allocations
are
sensitive
to
exchange
rate
fluctuations.
At
the
end
of
2020,
the
net
assets
of
Wärtsilä’s
foreign
subsidiaries
and
joint
ventures
outside
the
euro
zone
totalled
EUR
956
million
(1,041).
In
addition,
goodwill
and
purchase
price
allocations
from
acquisitions
nominated
in
foreign
currencies
amounted
to
EUR
865
million
(926).
In
2020,
the
translation
differences
recognised
in
other
comprehensive
income
mainly
come
from
changes
in
the
GBP
exchange
rate.
Approximately
65%
(67)
of
sales
and
61%
(59)
of
operating
costs
were
denominated
in
euros,
and
approximately
20%
(20)
of
sales
and
11%
(10)
of
operating
costs
were
denominated
in
US
dollars.
The
remainder
were
split
between
several
currencies.
The
Group’s
profits
and
competitiveness
are
also
indirectly
affected
by
the
home
currencies
(USD,
GBP,
JP
Y
and
KRW)
of
its
main
competitors.
As
Wärtsilä's operations are global
,
they
often
involve
currency
risks.
The
largest
operative
currency
positions
(excluding
financing)
open
as
of
31
December
2020
by
currency
pair
are
listed
below.
2020
Statement
of
financial
position
Estimated
cash
flows
MEUR
Base
currency
received
Base
currency
paid
Base
currency
received
Base
currency
paid
Net
EUR/USD
42
53
147
303
167
EUR/NOK
61
30
281
1
310
USD/NOK
30
231
3
259
EUR/CNY
13
20
65
4
63
EUR/GBP
18
20
89
88
EUR/SGD
16
11
20
26
EUR/JPY
13
6
18
3
22
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
2019
Statement
of
financial
position
Estimated
cash
flows
MEUR
Base
currency
received
Base
currency
paid
Base
currency
received
Base
currency
paid
Net
EUR/USD
77
152
338
512
249
EUR/NOK
119
48
304
17
358
USD/NOK
50
14
72
108
EUR/CNY
32
26
70
76
EUR/GBP
24
18
8
71
56
EUR/JPY
11
7
9
25
12
As
the
main
funding
currency
for
the
Group,
including
the
Group
Treasury,
is
the
euro
and
since
the
subsidiaries
are
normally
funded
in
their
home
currencies
by
the
Group
Treasury,
the
Group
Treasury
had
the
following
related
open
currency
positions
as
of
31
December
2020.
2020
2019
MEUR
Loans
Deposits
Net
Loans
Deposits
Net
Intragroup
loans/deposits
USD
15
282
266
35
391
356
GBP
68
60
9
48
93
46
CHF
61
61
103
103
AUD
49
49
52
52
NOK
1
1
41
41
SGD
19
19
1
32
31
CNY
12
12
13
13
CAD
11
11
11
11
Other
currencies*
6
1
7
2
5
7
External
loans/deposits
JPY
237**
237
246**
246
USD
20
20
Total
388
455
692
435
639
906
*
The
other
currencies
do
not
net
as
they
are
of
different
currencies.
**
External
JPY
loans
are
fully
hedged
with
cross
currency
swaps.
Some
Group
companies
in
countries
whose
currencies
are
not
fully
convertible,
such
as
Argentina,
Brazil,
and
Indonesia,
have
unhedged,
intercompany
loans
nominated
either
in
EUR
or
USD,
which
may
result
in
some
foreign
exchange
differences.
The
total
amount
of
these
loans
is
EUR
66
million
(192).
Wärtsilä
does
not
hedge
translation
risk.
The
most
significant
currencies
for
Wärtsilä
are
presented
in
Note
6.6.
Exchange
rates.
Interest
rate
risk
Wärtsilä
is
exposed
to
interest
rate
risk
primarily
through
market
value
changes
to
the
net
debt
portfolio
(price
risk)
,
as
well
as
through
changes
in
interest
rates
(re-fixing
on
rollovers).
Interest
rate
risk
is
managed
by
constantly
monitoring
the
market
value
of
the
financial
instruments
and
by
using
sensitivity
analysis.
Interest
-bearing
loan
capital
at
the
end
of
2020
totalled
EUR
1,161
million
(908).
The
average
interest
rate
was
0.8%
(0.9)
and
the
average
re
-fixing
time
13
months
(21).
Wärtsilä
spreads
its
interest
rate
risk
exposure
by
taking
both
fixed
and
floating
rate
loans.
The
share
of
fixed
rate
loans
as
a
proportion
of
the
total
debt
can
vary
between
30
and
70%.
The
Board
of
Directors
has
given
authorisation
to
temporarily
increase
the
share
of
fixed
loans
up
to
100%,
and
the
authorisation
is
valid
until
January
2022.
Wärtsilä
hedges
its
loan
portfolio
by
using
derivat
ive
instruments
,
such
as
interest
rate
swaps,
futures
and
options.
MEUR
2020
2019
Fixed
rate
loans
366
406
Floating
rate
loans
796
503
Derivatives
424
424
Share
of
fixed
rate
loans
of
total
loans
(including
derivatives),
%
68
91
At
the
end
of
2020,
a
one
percentage
point
parallel
decrease/increase
of
the
yield
curve
would
have
resulted
in
a
EUR
26
million
(28)
increase/decrease
in
the
value
of
the
net
debt
portfolio,
including
derivatives.
A
one
percentage
point
change
in
the
inte
rest
level
would
cause
a
EUR
4
million
(1)
change
in
the
following
year’s
interest
expenses
from
the
debt
portfolio,
including
derivatives.
Additional
information
related
to
loans
can
be
found
in
Note
5.2.
Financial
assets
and
liabilities
by
measurement
c
ategory
and
Note
5.6.
Maturity
analysis
of
financial
liabilities.
Information
on
interest
rate
derivatives
is
presented
in
Note
5.7.
Derivative
financial
instruments.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Liquidity
and
refinancing
risk
Wärtsilä
ensures
sufficient
liquidity
at
all
times
by
efficient
cash
management
and
by
maintaining
sufficient
available
committed
and
uncommitted
credit
lines.
Refinancing
risk
is
managed
by
having
a
balanced
and
sufficiently
long
loan
portfolio.
Due
to
the
COVID
-
19
pandemic,
the
liquidity
reserves
of
the
Group
have
been
strengthened.
The
Revolving
Credit
Facilities
(RCF)
having
maturity
dates
in
2020
were
extended
until
the
end
of
2021,
and
their
total
amount
was
increased
by
EUR
20
million.
The
total
amount
of
available
RCFs,
EUR
660
million,
is
fully
un-
utili
sed.
Other
COVID
-19
related
funding
arrangements
resulted
in
disbursement
of
new
long
-term
loans
totalling
EUR
190
million.
As
of
31
December
2020,
the
Group’s
liquidity
reserves
were
at
high
level
and
the
liquidity
position
is
expected
to
remain
strong
du
ring
2021.
The
existing
loan
facilities
include:
•
Committed
Revolving
Credit
Facilities
totalling
EUR
660
million
(640).
•
Finnish
Commercial
Paper
programmes
totalling
EUR
850
million
(800).
The
average
maturity
of
the
non-current
debt
is
36
months
(4
6)
and
the
average
maturity
of
the
confirmed
credit
lines
is
21
months
(30).
Additional
information
in
Note
5.6.
Maturity
analysis
of
financial
liabilities.
At
year-end,
the
Group
had
cash
and
cash
equivalents
totalling
EUR
932
million
(369),
of
which
EUR
14
million
(11)
is
related
to
assets
held
for
sale,
as
well
as
EUR
660
million
(640)
of
non-utilised
committed
credit
facilities.
Commercial
Paper
Programmes
were
not
utilised
on
31
December
2020
nor
on
31
December
2019.
Committed
Revolving
Credit
Facilities
,
as
well
as
the
parent
company's
long-term
loans,
include
a
financial
covenant
(solvency
ratio).
The
s
olvency
ratio
is
expected
to
remain
clearly
over
the
covenant
level
for
the
foreseeable
future.
Revolving
credit
facilities
MEUR
2020
2019
Year
Maturing
Available
(end
of
period)
Maturing
Available
(end
of
period)
2019
-
-
640
2020
660
130
510
2021
280
380
130
380
2022
90
290
90
290
2023
160
130
160
130
2024
130
130
Credit
risk
Responsibility
for
managing
the
credit
risks
associated
with
ordinary
commercial
activities
lies
with
the
Businesses
and
the
Group
companies.
Major
trade
and
project
finance
credit
risks
are
minimised
by
transferring
risks
to
banks,
insurance
companies
,
and
export
credit
organisations.
The
credit
risks
related
to
the
placement
of
liquid
funds
and
to
trading
in
financial
instruments
are
minimised
by
setting
explicit
limits
for
the
counterparties,
and
by
making
agreements
only
with
the
most
reputable
domestic
and
international
banks
and
financial
institutions.
As
only
high
credit
quality
(A-
minimum
rating
requirement)
counterparties
are
utilised
for
derivative
financial
instruments
,
and
the
transactions
are
made
under
ISDA
Master
Agreements,
no
credit
losses
are
expected
from
these
instruments.
The
Group
companies
deposit
the
maximum
amount
of
their
liquid
financial
assets
with
the
centralised
treasury
when
local
laws
and
central
bank
regulations
allow
it.
The
Group’s
funds
are
placed
in
instruments
with
sufficient
liquidity
(current
bank
deposits
or
Finnish
Commercial
Papers)
and
rating
(at
least
single
-A
rated
instruments
or
other
instruments
approved
by
the
Group’s
CFO).
These
placements
are
constantly
monitored
by
the
Group
Treasury,
and
Wärtsilä
does
not
expect
any
future
defaults
from
the
placements.
The
expected
credit
losses
associated
with
investments
carried
at
amortised
cost
are
assessed
on
a
forward-
looking
basis
based
on
investment
maturity
dates,
and
counterparty
credit
risk
on
a
quarterly
basis.
As
of
31
December
2020,
the
expected
credit
loss
was
not
material.
The
expected
credit
losses
are
presented
in
Note
4.2.
Trade
receivables
and
contract
assets
and
liabilities
.
Equity
price
risk
Wärtsilä
has
equity
investments
totalling
EUR
12
million
(14)
in
power
plant
companies,
most
of
which
are
located
in
developing
countries
and
performing
well
according
to
expectations.
Additional
information
is
given
in
Note
5.2.
Financial
assets
and
liabilities
by
measurement
category.
Capital
risk
management
Wärtsilä’s
policy
is
to
secure
a
strong
capital
base,
both
to
maintain
the
confidence
of
investors
and
creditors
and
for
the
future
development
of
the
business.
The
capital
is
defined
as
total
equity,
including
non-controlling
interests
and
net
interest
-bearing
debt.
The
target
for
Wärtsilä
is
to
maintain
gearing
below
0.50
and
to
pay
a
dividend
of
at
least
50%
of
earnings
over
the
cycle.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
MEUR
2020
2019
Interest
-bearing
debt,
non-current
1,005
851
Lease
liabilities,
non-current
124
146
Interest
-bearing
debt,
current
156
58
Lease
liabilities,
current
42
42
Total
interest
-bearing
liabilities
1,327
1,096
Interest
-bearing
receivables
-1
-1
Cash
and
cash
equivalents
-919
-358
Cash
and
cash
equivalents
pertaining
to
assets
held
for
sale
-14
-11
Total
interest
-bearing
assets
-933
-370
Total
net
interest
-bearing
debt
394
726
Total
equity
2,188
2,410
Gearing
0.18
0.30
In
the
capital
management
Wärtsilä
also
follows
the
gearing
development:
Equity
and
liabilities
6,232
6,398
Advances
received
-452
-452
5,780
5,946
Solvency
ratio,
%
38.1
40.8
6.
GROUP
STRUCTURE
6.1.
ACQUISITIONS
Accounting
principles
Acquired
and
established
companies
are
accounted
for
using
the
acquisition
method.
Accordingly,
the
purchase
price
and
the
acquired
company’s
identifiable
assets,
liabilities
,
and
contingent
liabilities
are
measured
at
fair
value
on
the
date
of
acquisition.
In
the
acquisition
of
additional
interest,
where
the
Group
already
has
control,
the
non-controlling
interest
is
measured
either
at
fair
value
or
at
the
non
-controlling
interests’
proportionate
share
of
the
identifiable
net
assets.
The
difference
between
the
purchase
price,
possible
equity
belonging
to
the
non-controlling
interests
,
and
the
acquired
company’s
net
identifiable
assets,
liabilities
and
contingent
liabilities
measured
at
fair
value,
is
goodwill.
Goodwill
is
tested
for
impairment
at
least
annually.
The
purchase
price
includes
the
consideration
paid,
measured
at
fair
value.
The
consideration
does
not
include
transaction
costs,
which
are
recognised
in
the
statement
of
income.
The
transaction
costs
are
expensed
in
the
same
reporting
period
in
which
they
occur,
except
those
costs
resulting
from
issued
debt
or
equity
instruments.
In
significant
business
combinations,
the
Group
has
used
external
advis
ors
when
estimating
the
fair
values
of
property,
plant
and
equipment
and
intangible
assets.
For
property,
plant
and
equipment,
comparisons
have
been
made
of
the
market
prices
of
similar
assets,
and
the
depreciation
of
the
acquired
assets
due
to
ageing,
wear,
and
other
similar
factors
has
been
estimated.
The
fair
value
measurement
of
intangible
assets
is
based
on
estimates
of
the
future
cash
flows
associated
with
the
assets.
The
acquired
identifiable
intangible
assets
typically
include
technology,
customer
relationships,
and
trademarks.
Any
contingent
consideration
(additional
purchase
price)
related
to
the
combination
of
businesses
is
measured
at
fair
value
on
the
date
of
acquisition.
It
is
classified
either
as
a
liability
or
equity.
Contingent
consideration
classified
as
a
liability
is
measured
at
fair
value
on
the
last
day
of
each
reporting
period,
and
the
resulting
loss
or
gain
is
recognised
through
the
statement
of
income.
Contingent
consideration
classified
as
equity
is
not
re-
measured.
The
acquired
subsidiaries
are
included
in
the
consolidated
financial
statements
from
the
day
the
Group
has
control.
Accounting
estimates
and
judgements
Accounting
for
the
business
combinations
may
require
estimates
of
the
fair
value
of
acquired
assets
and
the
expected
amount
of
realised
contingent
consideration.
2020
In
2020,
there
were
no
acquisitions.
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
2019
Ships
Electronic
Services
Ltd
In
May,
Wärtsilä
acquired
100%
of
Ships
Electronic
Services
Ltd
(“SES”),
a
UK
based
company
specialising
in
navigation
and
communication
electronics,
installation,
maintenance
and
repair
services,
mainly
for
commercial
and
leisure
vessels.
SES’
turnover
was
approximately
GBP
10
million
and
the
company
employed
a
staff
of
47.
The
enterprise
value
of
the
transaction
was
GBP
3.2
million.
The
consideration
paid
and
the
impact
on
profit
for
the
fi
nancial
period
were
not
significant.
6.2.
DISPOSALS
Accounting
principles
The
disposed
subsidiaries
are
included
in
the
consolidated
financial
statements
until
the
control
ends.
2020
In
October
2020,
Wärtsilä
divested
the
shares
in
Wärtsilä
JOVYATLAS
GmbH
to
Jacob
Waitz
Industrie
GmbH.
Wärtsilä
JOVYATLAS
has
been
manufacturing
UPS
systems,
rectifiers,
power
inverters,
frequency
transformers
and
resistors
with
related
services
for
many
industries
already
for
seven
decades.
In
2019,
its
net
sales
were
EUR
20
million.
The
impact
of
the
divestment
on
the
profit
for
the
financial
period
is
approximately
EUR
-6
million.
Also
,
in
October
2020,
Wärtsilä
divested
the
shares
in
Wärtsilä
Valves
Ltd
to
an
affiliate
of
Evergreen
Capital
L.P.
Wärtsilä
Valves
’
activities
included
the
engineering,
assembly,
testing,
sales
,
and
delivery
of
nickel
aluminium
bronze
(NAB)
and
duplex
valves
for
marine,
oil
&
gas
and
energy
markets.
It
also
offers
applications
for
Valves’
products,
including,
for
example,
FPSO,
petrochemical
facilities,
power
generation,
LNG,
naval
marine,
marine
services,
waste
water
treatment
plants
and
pipelines.
The
annual
net
sales
were
approximately
EUR
15
million
in
2019.
The
impact
of
the
divestment
on
the
profit
for
the
financial
period
is
approximately
EUR
-10
million.
In
December
2020,
Wärtsilä
finali
sed
the
divestment
of
shares
in
Wärtsilä
ELAC
Nautik
GmbH
(ELAC
Nautik)
to
Cohort
plc.
The
divestment
was
originally
announced
in
December
2019.
ELAC
Nautik’s
main
market
focus
was
hydroacoustic
products,
including
sonars,
underwater
communication
systems,
and
echo
systems
for
small
and
medium
sized
military
submarines.
The
annual
net
sales
were
approximately
EUR
21
million
in
2019.
The
impact
of
the
divestment
on
the
profit
for
the
financial
period
is
not
significant.
All
businesses
disposed
belonged
to
Portfolio
Business.
2019
In
2019,
there
were
no
disposals.
6.3.
ASSETS
HELD
FOR
SALE
Accounting
principles
Non-current
assets
and
assets
and
liabilities
related
to
discontinued
operations
are
classified
as
held
for
sale
if
their
carrying
amounts
are
expected
to
be
recovered
primarily
through
sale
rather
than
through
continuing
use.
Classification
as
held
for
sale
requires
that
the
following
criteria
are
met;
the
sale
is
highly
probable,
the
asset
is
available
for
immediate
sale
in
its
present
condition
subject
to
usual
and
customary
terms,
the
management
is
committed
to
the
sale,
and
the
sale
is
expected
to
be
completed
within
one
year
from
the
date
of
classification.
Prior
to
classification
as
held
for
sale,
the
assets
or
assets
and
liabilities
related
to
a
disposal
group
in
question
are
measured
according
to
the
respective
IFRS
standards.
From
the
date
of
classification,
non-
current
assets
held
for
sale
are
measured
at
the
lower
of
the
carrying
amount
and
the
fair
value
less
costs
to
sell,
and
the
recognition
of
depreciation
and
amortisation
is
discontinued.
Non-current
assets
held
for
sale
are
presented
in
the
statement
of
financial
position
separately
from
other
items.
The
comparison
figures
for
the
statement
of
financial
position
are
not
restated.
2020
Wärtsilä
has
classified
Entertainment
and
Tank
Control
businesses
as
assets
held
for
sale.
Entertainment
business
has
been
classified
as
assets
held
for
sale
since
the
fourth
quarter
of
2019
and
Tank
Control
business
since
the
second
quarter
of
2020.
Completion
of
the
transactions
are
expected
in
the
first
half
of
2021.
Additionally,
Wärtsilä
has
started
preparations
to
divest
Wärtsilä
EUROATLAS
GmbH,
which
is
also
classified
as
assets
held
for
sale.
Completion
of
the
transaction
is
expected
during
the
second
half
of
2021.
The
impact
on
the
profit
for
the
financial
period
is
approximately
EUR
-
6
million.
All
assets
held
for
sale
belong
to
Portfolio
Business
and
they
are
valued
at
the
lower
of
book
value
or
fair
value.
2019
In
December,
Wärtsilä
announced
the
divestment
of
shares
in
Wärtsilä
ELAC
Nautik
GmbH
(ELAC
Nautik)
to
Cohort
plc.
ELAC
Nautik's
main
market
focus
is
on
hydroacoustic
products,
including
sonars,
underwater
communication
systems
and
echo
systems
for
small
and
medium
sized
military
submarines.
Wärtsilä,
through
its
Smart
Marine
Ecosystem
approach,
is
leading
the
marine
industry’s
transition
into
a
new
era
of
high
efficiency,
greater
safety,
and
outstanding
environmental
performance.
As
this
is
Wärtsilä's
core
strategy
for
Marine
Business,
and
ELAC
Nautik
’s
business
has
no
clear
synergistic
link
to
Wärtsilä’s
Smart
Marine
activities
in
transforming
the
marine
sector,
Wärtsilä’s
portfolio
is
being
aligned
to
those
growth
businesses
that
can
drive
this
transition.
This
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Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
Additionally,
Wärtsilä
has
started
preparations
to
divest
its
Entertainment
business,
which
is
also
classified
as
assets
held
for
sale.
The
assets
held
for
sale
belong
to
the
Wärtsilä
Marine
Business
segment
and
they
are
valued
at
the
lower
of
book
value
or
fair
value.
Subject
to
approvals,
completion
of
these
transactions
is
expected
in
the
early
part
of
2020.
Items
on
statement
of
financial
positi
on
MEUR
31.12.2020
31.12.2019
Goodwill
7
Other
intangible
assets
1
Property,
plant
and
equipment
4
3
Right
-of
-use
assets
2
4
Deferred
tax
assets
12
8
Inventories
23
18
Other
receivables,
current
42
39
Cash
and
cash
equivalents
14
11
Assets
held
for
sale
105
82
Write
-down
of
assets
-6
Net
for
assets
held
for
sale
99
82
Interest
-bearing
debt,
non-current
4
Deferred
tax
liabilities
12
8
Other
liabilities,
non-current
3
8
Other
liabilities,
current
52
47
Liabilities
directly
attributable
to
assets
held
for
sale
68
68
Net
assets
31
14
In
2020,
the
write
-down
of
assets
EUR
-6
million,
relates
to
the
classification
of
Wärtsilä
EUROATLAS
GmbH
as
assets
held
for
sale.
The
expense
is
recognised
in
depreciation,
amorti
s
ation
and
impairment
in
the
statement
of
income.
6.4.
INVESTMENTS
IN
ASSOCIATES
AND
JOINT
VENTURES
Accounting
principles
Associated
companies
are
all
entities
over
which
the
Group
has
significant
influence
but
not
control
or
joint
control.
This
is
generally
the
case
where
the
Group
holds
between
20%
and
50%
of
the
voting
rights.
A
joint
venture
is
a
joint
arrangement
whereby
the
parties
that
have
joint
control
of
the
arrangement
have
rights
to
the
net
assets
of
the
joint
venture.
Joint
control
is
established
by
contractual
agreement.
Associated
companies
and
joint
ventures
are
included
in
the
consolidated
financial
statements
using
the
equity
method
from
the
date
the
Group’s
significant
influence
or
joint
control
commences
until
the
date
it
ceases.
Investments
in
associates
are
initially
recognised
at
cost,
and
the
carrying
amount
is
increased
or
decreased
according
to
the
Group´s
share
of
changes
in
the
net
assets
of
the
associate
after
the
date
of
the
acquisition.
The
Group’s
share
of
the
associated
company’s
or
joint
venture’s
profit
for
the
reporting
period
is
shown
as
a
separate
item
before
the
Group’s
operating
result,
on
the
line
Share
of
result
of
associates
and
joint
ventures.
The
Group’s
share
of
the
associated
company’s
or
joint
venture’s
changes
recognised
in
other
comprehensive
income
is
recognised
in
the
Group’s
other
comprehensive
income.
Wärtsilä’s
proportion
of
the
associated
company’s
or
joint
venture’s
post
-acquisition
accumulated
equity
is
included
in
the
Group’s
equity.
If
the
Group’s
share
of
the
associated
company's
or
joint
venture's
losses
exceeds
its
interest
in
the
company,
the
carrying
amount
is
written
down
to
zero.
After
this,
losses
are
only
recognised
if
the
Group
has
incurred
obligations
from
the
associated
company
or
joint
venture.
The
accumulated
exchange
rate
differences
arising
from
the
consolidation
of
associated
companies
and
joint
ventures,
which
are
recognised
in
equity,
are
recognised
in
the
statement
of
income
as
part
of
the
gain
or
loss
when
change
in
ownership
occurs.
MEUR
2020
2019
Carrying
amount
on
1
January
42
66
Share
of
result
3
-9
Dividends
-1
-1
Translation
differences
-2
-1
Reduction
of
share
capital
in
associates
and
joint
ventures
-28
Impairment
9
-13
Carrying
amount
on
31
December
23
42
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/
Sustainability
/
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/
Financial
review
Summary
of
financial
information
(100%):
2020
MEUR
Holding
%
Non
-current
assets
Current
assets
Equity
Non
-current
liabilities
Current
liabilities
Net
sales
Profit
for
the
financial
period
Joint
ventures
Wärtsilä
Qiyao
Diesel
Company
Ltd.
China
50.0
7
32
22
0
17
54
5
Wärtsilä
Hyundai
Engine
Co
Ltd.
South
Korea
0.0
-2
CSSC
Wärtsilä
Electrical
&
Automation
Co.,
Ltd.
China
49.0
0
4
2
0
2
19
0
CSSC
Wärtsilä
Engine
(Shanghai)
Co.,
Ltd.
China
49.0
21
73
20
0
74
66
1
Repropel
Sociedad
de
reparacao
de
helices
Portugal
50.0
2
1
1
1
CSSC
Wärtsilä
Engine
(Shanghai)
Co.,
Ltd.
manufactures
medium
and
large
bore
medium
speed
diesel
and
dual
-fuel
engines
at
its
factory
in
Lingang,
Shanghai,
China.
Wärtsilä
Hyundai
Engine
Co
Ltd.
manufactures
Wärtsilä
50DF
dual-fuel
engines
for
LNG
carriers
and
other
marine
applications
in
Mokpo,
South
Korea.
Wärtsilä
Qiyao
Diesel
Company
Ltd.
manufac
tures
marine
auxiliary
engines
in
Shanghai,
China.
CSSC
Wärtsilä
Electrical
&
Automation
Co.,
Ltd.
manufactures
advanced
electronical
and
automation
solutions
for
the
cruise
industry.
Wärtsilä
Hyundai
Engine
Co
Ltd.
was
disposed
on
31
December
2020.
During
the
financial
period,
Wärtsilä
Land
&
Sea
Academy,
Inc
.
was
liquidated,
and
the
shares
of
Neptun
Maritime
AS
were
sold.
2019
MEUR
Holding
%
Non
-current
assets
Current
assets
Equity
Non
-current
liabilities
Current
liabilities
Net
sales
Profit
for
the
financial
period
Joint
ventures
Wärtsilä
Qiyao
Diesel
Company
Ltd.
China
50.0
7
32
19
20
30
2
Wärtsilä
Hyundai
Engine
Co
Ltd.
South
Korea
50.0
14
57
68
1
2
19
-21
CSSC
Wärtsilä
Electrical
&
Automation
Co.,
Ltd.
China
49.0
10
2
8
9
CSSC
Wärtsilä
Engine
(Shanghai)
Co.,
Ltd.
China
49.0
19
77
20
76
78
1
Repropel
Sociedad
de
reparacao
de
helices
Portugal
50.0
1
1
1
Associated
companies
Wärtsilä
Land
&
Sea
Academy,
Inc.
Philippines
40.0
-2
2
Neptun
Maritime
AS
Norway
40.0
1
1
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
6.5.
SUBSIDIARIES
Accounting
principles
The
consolidated
financial
statements
include
the
parent
company
Wärtsilä
Corporation
and
all
subsidiaries
over
which
the
Group
has
control.
The
Group
controls
an
entity
when
the
Group
is
exposed
to,
or
has
rights
to,
variable
returns
from
its
involvement
with
the
entity
and
has
the
ability
to
affect
those
returns
through
its
power
to
direct
the
activities
of
the
entity.
When
the
Group
has
less
than
a
majority
of
voting
or
similar
rights
in
an
entity,
the
Group
considers
all
relevant
facts
and
circumstances
in
assessing
whether
it
has
power
over
an
entity,
including
the
contractual
arrangements,
voting
rights,
and
potential
voting
rights.
The
Group
reassesses
whether
or
not
it
controls
an
entity
if
facts
and
circumstances
indicate
that
there
are
changes
to
the
elements
of
control.
The
financial
information
from
subsidiaries
in
countries
with
hyperinflation
are
adjusted
according
to
IAS
29,
when
the
impact
of
the
hyperinflation
is
considered
material
for
the
consolidated
financial
statements.
Geo
-
graph
-
ical
area
Company
name
Location
Activities
Share
%
Europe
Wärtsilä
Cyprus
Limited
Cyprus
Sales
and
services
100.0
Wärtsilä
Danmark
A/S
Denmark
Sales
and
services
100.0
Wärtsilä
Lyngsø
Marine
A/S
Denmark
Sales
and
services
100.0
Wärtsilä
Puregas
Solutions
A/S
Denmark
Sales
and
services
100.0
Wärtsilä
BLRT
Estonia
Oü
Estonia
Sales
and
services
51.7
Eniram
Oy
Finland
Sales
and
services
100.0
Wärtsilä
Finland
Oy
Finland
Production,
sales
and
services
100.0
Wärtsilä
Projects
Oy
Finland
Sales
and
services
100.0
Wärtsilä
Solutions
Oy
Finland
Sales
and
services
100.0
Wärtsilä
Technology
Oy
Ab
Finland
Holding
100.0
Wärtsilä
France
S.A.S.
France
Sales
and
services
100.0
Wärtsilä
Voyage
Mediterranean
SAS
France
Sales
and
services
100.0
Wärtsilä
Deutschland
GmbH
Germany
Sales
and
services
100.0
Wärtsilä
Funa
International
GmbH
Germany
Sales
and
services
100.0
Wärtsilä
SAM
Electronics
GmbH
Germany
Sales
and
services
100.0
Wärtsilä
Voyage
Germany
GmbH
Germany
Sales
and
services
100.0
Wärtsilä
Serck
Como
GmbH
Germany
Sales
and
services
100.0
Wärtsilä
Guidance
Marine
Ltd
the
United
Kingdom
Sales
and
services
100.0
Wärtsilä
Puregas
Solutions
Ltd
the
United
Kingdom
Sales
and
services
100.0
Wärtsilä
UK
Ltd
the
United
Kingdom
Production,
sales
and
services
100.0
Wärtsilä
Voyage
UK
Limited
the
United
Kingdom
Sales
and
services
100.0
Ships
Electronic
Services
Ltd
the
United
Kingdom
Sales
and
services
100.0
Greenham
Regis
Ltd
the
United
Kingdom
Sales
and
services
100.0
Wärtsilä
Water
Systems
Ltd
the
United
Kingdom
Sales
and
services
100.0
Wärtsilä
Defence
Solutions
Ltd
the
United
Kingdom
Sales
and
services
100.0
Wärtsilä
Greece
S.A.
Greece
Sales
and
services
100.0
Wärtsilä
Hungary
Kft
Hungary
Sales
and
services
100.0
Wärtsilä
Voyage
Investments
Unlimited
Company
Ireland
Sales
and
services
100.0
Transas
New
Building
Limited
Ireland
Sales
and
services
100.0
Wärtsilä
Voyage
Limited
Ireland
Sales
and
services
100.0
Wärtsilä
APSS
Srl
Italy
Sales
and
services
100.0
Wärtsilä
Italia
S.p.A.
Italy
Production,
sales
and
services
100.0
Trident
Italia
Srl
Italy
Sales
and
services
100.0
Wärtsilä
Moss
AS
Norway
Production,
sales
and
services
100.0
Wärtsilä
Norway
AS
Norway
Production,
sales
and
services
100.0
Wärtsilä
Gas
Solutions
Norway
AS.
Norway
Sales
and
services
100.0
Wärtsilä
Valmarine
AS
Norway
Sales
and
services
100.0
Wärtsilä
Baltic
Design
Centre
Sp.z.o.o.
Poland
Sales
and
services
100.0
Wärtsilä
Polska
Sp.z.o.o.
Poland
Sales
and
services
100.0
Wärtsilä
Voyage
Poland
sp.
z.o.o.
Poland
Sales
and
services
100.0
Wärtsilä
Portugal
S.A.
Portugal
Sales
and
services
100.0
Wärtsilä
Vostok,
LLC
Russia
Sales
and
services
100.0
Transas
Navigator
Ltd.
Russia
Sales
and
services
100.0
Wärtsilä
Digital
Technologies,
JSC
Russia
Sales
and
services
100.0
Wärtsilä
Ibérica
S.A.
Spain
Production,
sales
and
services
100.0
Burriel
Navarro
S.L.
Spain
Sales
and
services
100.0
Trident
Las
Palmas
S.L.
Spain
Sales
and
services
100.0
Wärtsilä
Sweden
AB
Sweden
Production,
sales
and
services
100.0
Wärtsilä
Voyage
Sweden
AB
Sweden
Sales
and
services
100.0
Wärtsilä
Services
Switzerland
AG
Switzerland
Sales
and
services
100.0
Quantiparts
B.V.
The
Netherlands
Sales
and
services
100.0
Wärtsilä
Netherlands
B.V.
The
Netherlands
Production,
sales
and
services
100.0
Trident
B.V.
The
Netherlands
Sales
and
services
100.0
Wärtsilä
Voyage
Netherlands
BV
The
Netherlands
Sales
and
services
100.0
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/
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/
Financial
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The
Americas
Wärtsilä
Argentina
S.A.
Argentina
Sales
and
services
100.0
Wärtsilä
Brasil
Ltda.
Brazil
Production,
sales
and
services
100.0
Wärtsilä
Canada
Inc.
Canada
Sales
and
services
100.0
Wärtsilä
Chile
Ltda.
Chile
Sales
and
services
100.0
Wärtsilä
Colombia
S.A.
Colombia
Sales
and
services
100.0
Wärtsilä
Dominicana
Inc.
Dominican
Republic
Sales
and
services
100.0
Wärtsilä
Ecuador
S.A.
Ecuador
Sales
and
services
100.0
Wärtsilä
Guatemala
S.A.
Guatemala
Sales
and
services
100.0
Wärtsilä
Operations
Guyana
Inc.
Guyana
Sales
and
services
100.0
Wärtsilä
de
Mexico
S.A.
de
C.V.
Mexico
Sales
and
services
100.0
Wärtsilä
Panama
Services
S.A.
Panama
Sales
and
services
100.0
Wärtsilä
Peru
S.A.C.
Peru
Sales
and
services
100.0
Wärtsilä
Caribbean,
Inc.
Puerto
Rico
Sales
and
services
100.0
Wärtsilä
Uruguay
S.A.
Uruguay
Sales
and
services
100.0
American
Hydro
Corporation
USA
Sales
and
services
100.0
Guidance
Marine
LLC
USA
Sales
and
services
100.0
Wärtsilä
Defence
Inc.
USA
Sales
and
services
100.0
Wärtsilä
Dynamic
Positioning
Inc.
USA
Sales
and
services
100.0
Wärtsilä
North
America,
Inc.
USA
Sales
and
services
100.0
LOCK
-N
-STITCH
Inc.
USA
Sales
and
services
100.0
Wartsila
Voyage
Americas
Inc
USA
Sales
and
services
100.0
Asia
PT.
Wärtsilä
Indonesia
Indonesia
Sales
and
services
100.0
Wärtsilä
Azerbaijan
LLC
Azerbaijan
Sales
and
services
100.0
Wärtsilä
Bangladesh
Ltd.
Bangladesh
Sales
and
services
100.0
Wärtsilä
SAM
Electronics
(Taizhou)
Co.,
Ltd.
China
Sales
and
services
100.0
Wärtsilä
Propulsion
(Wuxi)
Co.
Ltd.
China
Production,
sales
and
services
100.0
Wärtsilä
Services
(Shanghai)
Co.
Ltd.
China
Sales
and
services
100.0
Wärtsilä
Ship
Design
(Shanghai)
Co.,
Ltd
China
Sales
and
services
100.0
Wärtsilä
Suzhou
Ltd.
China
Production,
sales
and
services
100.0
Wärtsilä
-CME
Zhenjiang
Propeller
Co.
Ltd.
China
Production,
sales
and
services
55.0
Wärtsilä
Voyage
(Shanghai)
Co.
Ltd.
Hong
Kong
Sales
and
services
100.0
Wärtsilä
China
Ltd.
Hong
Kong
Sales
and
services
100.0
Wärtsila
India
Private
Ltd.
India
Production,
sales
and
services
100.0
Wärtsilä
Japan
Ltd.
Japan
Production,
sales
and
services
100.0
Wärtsilä
Malaysia
Sdn.
Bhd.
Malaysia
Sales
and
services
100.0
Wärtsilä
Myanmar
Myanmar
Sales
and
services
100.0
Wärtsilä
Pakistan
(Pvt.)
Ltd.
Pakistan
Sales
and
services
100.0
Wärtsilä
Philippines
Inc.
Philippines
Sales
and
services
100.0
Wärtsilä
Doha
L.L.C.
Qatar
Sales
and
services
100.0
Wärtsilä
Power
Contracting
Company
Ltd.
Saudi
Arabia
Sales
and
services
60.0
Guidance
Marine
Pte
Ltd
Singapore
Sales
and
services
100.0
Wärtsilä
Singapore
Pte
Ltd
Singapore
Sales
and
services
100.0
Wärtsilä
Voyage
Pacific
Pte
Ltd
Singapore
Sales
and
services
100.0
Wärtsilä
Korea
Ltd.
South
Korea
Sales
and
services
100.0
Wärtsilä
Lanka
(PVT)
Ltd
Sri
Lanka
Sales
and
services
100.0
Wärtsilä
Taiwan
Ltd.
Taiwan
Sales
and
services
100.0
Wärtsilä
-Enpa
A.S.
Turkey
Sales
and
services
51.0
Wärtsilä
Gulf
FZE
United
Arab
Emirates
Sales
and
services
100.0
Wärtsilä
Hamworthy
Middle
East
(FZE)
United
Arab
Emirates
Sales
and
services
100.0
Wärtsilä
LLC
United
Arab
Emirates
Sales
and
services
100.0
Wärtsilä
Ships
Repairing
&
Maintenance
LLC
United
Arab
Emirates
Sales
and
services
100.0
Wärtsilä
Voyage
Middle
East
DMCEST
United
Arab
Emirates
Sales
and
services
100.0
Wärtsilä
(Vietnam)
Company
Limited
Vietnam
Sales
and
services
100.0
Other
Wärtsilä
Australia
Pty
Ltd.
Australia
Sales
and
services
100.0
Wärtsilä
Burkina
Faso
Burkina
Faso
Sales
and
services
100.0
Wärtsilä
Central
Africa
Plc
Cameroon
Sales
and
services
100.0
Wärtsilä
Egypt
Power
S.A.E
Egypt
Sales
and
services
100.0
Wärtsilä
Central
Africa
Gabon
Gabon
Sales
and
services
100.0
Wärtsilä
West
Africa
Guinea
S.A.
Guinea
Sales
and
services
100.0
Wärtsilä
Eastern
Africa
Limited
Kenya
Sales
and
services
100.0
Wärtsilä
Mauritanie
SA
Mauritania
Sales
and
services
100.0
Wärtsilä
Mocambique
LDA
Mozambique
Sales
and
services
100.0
Wärtsilä
Muscat
LLC
Oman
Sales
and
services
100.0
Wärtsilä
New
Zealand
Ltd
New
Zealand
Sales
and
services
100.0
Wärtsilä
Marine
&
Power
Services
Nigeria
Limited
Nigeria
Sales
and
services
100.0
Wärtsilä
PNG
Ltd
Papua
New
Guinea
Sales
and
services
100.0
Wärtsilä
West
Africa
S.A.
Senegal
Sales
and
services
100.0
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/
Sustainability
/
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/
Financial
review
Wärtsilä
Southern
Africa
(Pty)
Ltd.
South
Africa
Sales
and
services
100.0
Wärtsilä
Tanzania
Ltd
Tanzania
Sales
and
services
100.0
Wärtsilä
Uganda
Ltd.
Uganda
Sales
and
services
100.0
Non-controlling
interests
are
not
significant
in
the
Group's
activities
and
cash
flows
in
individual
subsidiaries.
The
list
excludes
subsidiaries,
which
do
not
have
a
significant
impact
on
the
profit
or
assets
of
the
Group.
A
complete
list
of
shares
and
securities
in
accordance
with
the
Finnish
Accounting
Ordinance
is
included
in
the
official
financial
statements
of
the
parent
company
prepared
in
accordance
with
the
Finnish
Accounting
Standards
(FAS).
6.6.
EXCHANGE
RATES
Accounting
principles
Translating
the
transactions
in
foreign
currencies
The
items
included
in
the
financial
statements
are
initially
recognised
in
the
functional
currency,
which
is
defined
for
each
Group
company
based
on
its
primary
economic
environment.
The
presentation
currency
of
the
consolidated
financial
statements
is
the
euro,
which
is
also
the
functional
and
presentation
currency
of
Wärtsilä
Corporation.
Foreign
subsidiaries
The
income
and
expenses
for
statements
of
income
and
statements
of
comprehensive
income
of
foreign
subsidiaries
are
translated
into
euros
at
the
quarterly
average
exchange
rates.
Statements
of
financial
position
are
translated
into
euros
at
the
exchange
rates
prevailing
at
the
end
of
the
reporting
period.
The
translation
of
the
profit
for
the
reporting
period
and
other
comprehensive
income
using
different
exchange
rates
in
the
statement
of
comprehensive
income
and
the
statement
of
financial
position
causes
translation
differences,
which
are
recognised
in
equity
and
in
other
comprehensive
income
as
change.
Translation
differences
of
foreign
subsidiaries’
acquisition
cost
eliminations
and
post
-acquisition
profits
and
losses
are
recognised
in
other
comprehensive
income
and
are
presented
as
a
separate
item
in
equity.
The
goodwill
generated
in
the
acquisition
of
foreign
entities
and
their
fair
value
adjustments
of
assets
and
liabilities
are
considered
as
assets
and
liabilities
of
foreign
entities,
which
are
translated
into
euros
using
the
exchange
rates
prevailing
at
the
end
of
the
reporting
period.
When
a
foreign
subsidiary
is
sold,
the
accumulated
exchange
rate
differences
recognised
in
the
equity
related
to
the
subsidiary
are
recognised
in
the
statement
of
income
as
a
part
of
the
gain
or
loss
on
sale.
Transactions
and
balances
in
foreign
currencies
Transactions
denominated
in
a
foreign
currency
are
translated
into
the
functional
currency
using
the
exchange
rate
prevailing
at
the
dates
of
the
transactions.
Receivables
and
liabilities
are
translated
at
the
exchange
rate
prevailing
at
the
end
of
the
reporting
period.
Exchange
rate
gains
and
losses
related
to
trade
receivables
and
liabilities
are
reported
on
the
applicable
line
in
the
statement
of
income
and
are
included
in
the
operating
result.
Exchange
rate
differences
related
to
financial
assets
and
financial
liabilities
are
reported
as
financial
items
in
the
statement
of
income,
except
exchange
rate
differences
related
to
non-
current
debt
that
is
part
of
the
Group's
net
investment
in
a
subsidiary.
Those
are
recognised
in
other
comprehensive
income
and
reported
as
translation
differences
in
equity.
In
the
consolidated
financial
statements,
there
are
approximately
60
currencies
consolidated.
The
most
significant
currencies
are
presented
here.
Closing
rates
Average
rates
31
December
2020
31
December
2019
2020
2019
AED
UAE
Dirham
4.50689
4.12602
4.19169
4.11203
AUD
Australian
Dollar
1.58960
1.59950
1.65540
1.61059
BRL
Brazilian
Real
6.37350
4.51570
5.89001
4.41354
CHF
Swiss
Franc
1.08020
1.08540
1.07031
1.11683
CNY
Yuan
Renminbi
8.02250
7.82050
7.87084
7.73388
DKK
Danish
Krone
7.44090
7.47150
7.45440
7.46607
GBP
Pound
Sterling
0.89903
0.85080
0.88921
0.87731
IDR
Indonesian
Rupiah
17,240.76000
15,595.60000
16,619.78000
15,835.95000
INR
Indian
Rupee
89.66050
80.18700
84.57954
78.85014
JPY
Yen
126.49000
121.94000
121.77545
122.05637
NOK
Norwegian
Krone
10.47030
9.86380
10.72476
9.84967
RUB
Russian
Ruble
91.46710
69.95630
82.64545
72.45934
SAR
Saudi
Riyal
4.60347
4.21365
4.28208
4.19884
SEK
Swedish
Krona
10.03430
10.44680
10.48813
10.58666
SGD
Singapore
Dollar
1.62180
1.51110
1.57357
1.52721
USD
US
Dollar
1.22710
1.12340
1.14128
1.11960
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7.
OTHER
NOTES
7.1.
COLLATERAL,
CONTINGENT
LIABILITIES,
AND
OTHER
COMMITMENTS
Accounting
principles
Contingent
liabilities
are
possible
obligations
resulting
from
previous
events,
the
existence
of
which
will
only
be
ascertained
once
the
uncertain
event
that
is
beyond
the
Group’s
control
materialises.
Existing
obligations
that
are
not
likely
to
require
the
fulfilment
of
a
payment
obligation,
or
the
amount
of
which
cannot
be
reliably
determined,
are
also
considered
contingent
liabilities.
2020
2019
MEUR
Debt
in
the
statement
of
financial
position
Collateral
Debt
in
the
statement
of
financial
position
Collateral
Mortgages
given
as
collateral
for
liabilities
and
commitments
Other
commitments
13
10
18
10
Total
13
10
18
10
Chattel
mortgages
and
other
pledges
and
securities
given
as
collateral
for
liabilities
and
commitments
Loans
from
credit
institutions
3
5
1
Other
commitments
17
21
Total
3
17
5
22
MEUR
2020
2019
Guarantees
and
contingent
liabilities
on
behalf
of
Group
companies
887
718
Total
887
718
Nominal
amounts
of
lease
liabilities
Low
-value
lease
liabilities
7
3
Short
-term
lease
liabilities
3
5
Leases
not
yet
commenced,
but
to
which
Wärtsilä
is
committed
191
143
Total
201
151
7.2.
RELATED
PARTY
DISCLOSURES
Related
parties
comprise
the
parent
company,
subsidiaries,
the
associated
companies
,
and
joint
ventures.
Related
parties
also
include
the
Board
of
Directors,
the
President
and
CEO,
the
Board
of
Management,
their
family
members,
and
entities
controlled
directly
or
indirectly
by
them.
Management
remuneration
Benefits
recognised
in
the
statement
of
income
TEUR
2020
2019
President
and
CEO
Salaries
and
other
short
-term
benefits
1,177
894
Statutory
pension
costs
184
123
Voluntary
pension
costs
179
179
Other
members
of
the
Board
of
Management
Salaries
and
other
short
-term
benefits
3,225
2,371
Statutory
pension
costs
267
305
Voluntary
pension
costs
247
342
Total
5,279
4,214
Board
of
Directors
on
31
December
2020
Tom
Johnstone,
Chairman
163
117
Markus
Rauramo,
Deputy
Chairman
135
97
Maarit
Aarni-Sirviö,
member
100
92
Karen
Bomba,
member
79
Karin
Falk,
member
80
77
Johan
Forssell,
member
85
81
Risto
Murto,
member
90
91
Mats
Rahmström,
member
79
Board
of
Directors,
until
5
March
2020
Kaj-Gustaf
Bergh,
member
2
81
Mikael
Lilius,
member
3
172
Total
814
806
Management
remuneration,
total
6,093
5,020
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review
The
holdings
of
Wärtsilä
shares
of
the
President
and
CEO,
and
the
members
of
the
Board
of
Directors
and
Board
of
Management
at
year
-end
were
238,875
shares
(289,036).
The
President
and
CEO
is
entitled
to
retire
on
reaching
63
years
of
age.
The
members
of
the
Board
of
Management
are
entitled
to
retire
on
reaching
the
statutory
retirement
age.
One
member
of
the
Board
of
Management
is
entitled
to
retire
earlier,
on
reaching
60
years
of
age.
The
Group
has
no
loan
receivables
from
the
executive
management
or
the
Board
of
Directors.
No
pledges
or
other
commitments
have
been
given
on
behalf
of
management
or
shareholders.
Business
transactions
with
the
associated
companies
and
joint
ventures
MEUR
2020
2019
Sales
to
the
associates
and
joint
ventures
23
31
Purchases
from
the
associates
and
joint
ventures
67
35
Receivables
from
the
associates
and
joint
ventures
6
8
Advances
paid
to
the
associates
and
joint
ventures
4
2
Payables
to
the
associates
and
joint
ventures
3
5
Detailed
financial
information
on
the
associated
companies
and
joint
ventures
is
presented
in
Note
6.4.
Investments
in
associates
and
joint
ventures.
7.3.
AUDITORS’
FEES
AND
SERVICES
The
following
remuneration
was
paid
to
auditors
and
accounting
firms
for
audits
based
on
applicable
legislation
and
for
other
services.
In
2020,
the
AGM
appointed
the
audit
firm
PricewaterhouseCoopers
Oy
as
Wärtsilä
Corporation's
auditor.
PricewaterhouseCoopers
Oy
has
provided
non
-
audit
services
totalling
EUR
0.4
million
to
entities
of
Wärtsilä
Group.
These
services
included
tax
services
(EUR
0.3
million
)
and
other
services
(EUR
0.1
million
).
2020
2019
MEUR
PwC
Others
PwC
Others
Audit
4.2
0.4
4.3
0.5
Tax
advisory
0.3
0.2
0.2
0.3
Other
services
0.1
0.1
0.3
Total
4.6
0.7
4.8
0.8
7.4.
EVENTS
AFTER
THE
BALANCE
SHEET
DATE
In
January
2021,
Wärtsilä
announced
the
divestment
of
100%
of
the
shares
in
its
Entertainment
business,
Wärtsilä
Funa
GmbH,
to
Videlio
SA,
a
French
public
limited
company.
Entertainment
is
engaged
in
the
field
of
design,
fabrication,
engineering
and
integration
of
entertainment
systems,
illumination,
light
control,
cabin
control,
broadcast
and
digital
audio
distribution
and
announcement
systems
for
cruise
vessels
and
entertainment
parks.
The
annual
revenues
were
approximately
EUR
50
million
in
2020.
The
ev
ent
is
not
expected
to
have
a
material
impact
on
the
profit
for
the
financial
period
2021.
This
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Financial
review
PARENT
COMPANY
FINANCIAL
STATEMENTS
PARENT
COMPANY
INCOME
STATEMENT
MEUR
2020
2019
Note
Other
operating
income
93
89
1
Personnel
expenses
-38
-37
2
Depreciation,
amortisation
and
impairments
-5
-4
3
Other
operating
expenses
-89
-108
Operating
result
-39
-60
Financial
income
and
expenses
4
Income
from
financial
assets
301
304
Interest
income
and
other
financial
income
64
90
Exchange
gains
and
losses
-2
1
Interest
expenses
and
other
financial
expenses
-58
-91
305
304
Result
before
appropriations
and
taxes
266
243
Group
contribution
2
Result
before
taxes
268
243
Income
taxes
-3
-3
5
Result
for
the
financial
period
265
240
PARENT
COMPANY
BALANCE
SHEET
MEUR
2020
2019
Note
ASSETS
Fixed
assets
6
Intangible
assets
Other
long-term
expenditure
8
10
Intangable
assets
and
construction
in
progress
1
1
9
11
Tangible
assets
Land
and
water
2
7
Machinery,
equipment
and
other
tangible
assets
6
6
9
13
Financial
assets
Shares
in
Group
companies
950
950
Other
shares
and
securities
2
1
951
951
Total
fixed
assets
969
974
Non
-current
receivables
Receivables
from
Group
companies
90
100
7
Loan
receivables
1
1
91
101
Current
receivables
Trade
receivables
1
Receivables
from
Group
companies
1,846
2,193
8
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Wärtsilä
/
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/
Governance
/
Financial
review
Other
receivables
1
1
Prepaid
expenses
and
accrued
income
41
29
9
1,890
2,224
Cash
and
bank
balances
699
113
Total
current
assets
2,680
2,438
Assets
3,649
3,413
MEUR
2020
2019
Note
EQUITY
AND
LIABILITIES
Equity
10
Share
capital
336
336
Share
premium
reserve
61
61
Retained
earnings
709
754
Result
for
the
financial
period
265
240
Total
equity
1,371
1,391
Accumulated
appropriations
Depreciation
difference
1
1
Provisions
13
18
Liabilities
11
Non
-current
Loans
from
credit
institutions
953
847
953
847
Current
Loans
from
credit
institutions
130
51
Trade
payables
6
14
Liabilities
to
Group
companies
1,129
1,052
13
Other
current
liabilities
1
2
Accrued
expenses
and
deferred
income
44
36
12
1,310
1,155
Total
liabilities
2,263
2,003
Equity
and
liabilities
3,649
3,413
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
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PARENT
COMPANY
CASH
FLOW
STATEMENT
MEUR
2020
2019
Cash
flow
from
operating
activities:
Result
before
appropriations
and
taxes
266
243
Adjustments
for:
Depreciation
and
amortisation
5
4
Gains
and
losses
on
sale
of
intangible
and
tangible
assets
-2
Financial
income
and
expenses
-305
-304
Cash
flow
before
changes
in
working
capital
-36
-56
Changes
in
working
capital:
Assets,
non-interest
-bearing,
increase
(-)
/
decrease
(+)
-14
11
Liabilities,
non-interest
-bearing,
increase
(+)
/
decrease
(-)
3
-45
-11
-34
Cash
flow
from
operating
activities
before
financial
items
and
taxes
-47
-90
Interest
and
other
financial
expenses
-60
-89
Dividends
received
from
operating
activities
301
304
Interest
and
other
financial
income
from
operating
activities
64
89
Income
taxes
paid
-3
-8
301
295
Cash
flow
from
operating
activities
254
205
Cash
flow
from
investing
activities:
Investments
in
tangible
and
intangible
assets
-3
-2
Proceeds
from
sale
of
tangible
and
intangible
assets
6
Cash
flow
from
investing
activities
3
-2
Cash
flow
after
investing
activities
257
203
Cash
flow
from
financing
activities:
Loans
receivables,
increase
(-)
/
decrease
(+)
355
18
Current
loans,
increase
(+)
/
decrease
(-)
63
-284
Proceeds
from
non-current
borrowing
245
150
Repayments
and
other
changes
of
non-current
loans
-51
-56
Group
contributions
76
Dividends
paid
-284
-284
Cash
flow
from
financing
activities
329
-381
Change
in
cash
and
bank
balances,
increase
(+)
/
decrease
(-)
586
-178
Cash
and
bank
at
beginning
of
period
113
291
Cash
and
bank
at
end
of
period
699
113
This
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ACCOUNTING
PRINCIPLES
FOR
THE
PARENT
COMPANY
The
financial
statements
of
the
parent
company,
Wärtsilä
Corporation,
have
been
prepared
in
accordance
with
the
provisions
of
the
Finnish
Accounting
Standards
(FAS).
The
preparation
of
the
financial
statements
requires
management,
in
compliance
with
the
regulations
in
force
and
good
accounting
practice,
to
make
estimates
and
assumptions
that
affect
the
measurement
and
timing
of
the
reported
information.
Actual
results
may
differ
from
these
estimates.
Transactions
denominated
in
foreign
currencies
and
derivatives
Business
transactions
in
foreign
currencies
are
recorded
at
the
rates
of
exchange
prevailing
on
the
transaction
date.
Receivables
and
payables
on
the
balance
sheet
date
are
valued
at
the
exchange
rates
prevailing
on
that
date.
Exchange
gains
and
losses
related
to
business
operations
are
treated
as
adjustments
to
other
operating
income
and
operating
expenses.
Exchange
gains
and
losses
related
to
financing
operations
are
entered
under
financial
income
and
expenses.
Derivatives
are
measured
at
fair
value.
Open
currency
derivatives,
including
interest
components,
are
valued
at
the
balance
sheet
date.
The
fair
value
of
interest
rate
swaps
is
calculated
by
discounting
the
future
cash
flows.
Derivative
changes
in
fair
value
are
immediately
recognised
in
financial
income
or
expenses
in
the
statement
of
income.
Research
and
development
costs
Research
and
development
costs
are
expensed
in
the
financial
period
in
which
they
occur.
Receivables
Receivables
are
valued
to
acquisition
cost
or
to
a
lower
probable
value.
Fixed
assets
and
depreciation
and
amortisation
Fixed
assets
are
valued
in
the
balance
sheet
at
their
direct
acquisition
cost
less
accumulated
depreciation
and
amortisastion.
Certain
land
areas
also
include
revaluations.
Depreciation
and
amortisation
is
based
on
the
following
useful
lives:
Other
long
-
term
expenditure
3
-
10
years
Buildings
20
-
40
years
Machinery
and
equipment
5
-
20
years
Leasing
Lease
payments
are
treated
as
rentals.
Provisions
Provisions
in
the
balance
sheet
comprise
those
items
which
the
company
is
committed
to
covering
either
through
agreements
or
otherwise,
but
which
are
not
yet
realised.
Changes
to
provisions
are
included
in
the
income
statem
ent.
Income
taxes
Income
taxes
in
the
income
statement
include
taxes
calculated
for
the
financial
year
based
on
Finnish
tax
provisions,
as
well
as
adjustments
to
taxes
in
prior
years.
Taxes
allocated
to
extraordinary
items
are
shown
in
the
notes
to
the
financial
statements.
Dividends
Dividends
proposed
by
the
Board
of
Directors
are
not
recorded
in
the
financial
statements
until
they
have
been
approved
by
the
Annual
General
Meeting.
This
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/
Sustainability
/
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/
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review
NOTES
TO
THE
PARENT
COMPANY
FINANCIAL
STATEMENTS
1.
OTHER
OPERATING
INCOME
MEUR
2020
2019
Rental
income
3
3
Services
to
Group
companies
88
85
Profit
on
sales
of
fixed
assets
2
Other
1
Total
93
89
2.
PERSONNEL
EXPENSES
MEUR
2020
2019
Wages
and
salaries
-32
-30
Pension
costs
-5
-5
Other
compulsory
personnel
costs
-1
-1
Total
-38
-37
Salaries
and
remunerations
paid
to
senior
management
Salaries
and
remunerations
paid
to
the
President
and
CEO
and
members
of
the
Board
of
Directors
was
EUR
2
million
(2).
The
President
and
CEO
has
the
right
to
retire
at
the
age
of
63
years.
The
members
of
the
Board
of
Management
are
entitled
to
retire
on
reaching
the
statutory
retirement
age.
One
member
of
the
Board
of
Management
is
entitled
to
retire
earlier,
on
reaching
60
years
of
age.
The
company's
Board
of
Directors
decides
the
remunerations
of
the
President
and
CEO
and
his
immediate
subordinates.
Additional
information
about
Management
remuneration
can
be
found
in
Consolidated
Financial
Statements
Note
7.2.
Related
p
arty
disclosures.
Personnel
on
average
during
the
year
was
373
(392).
3.
DEPRECIATION
AND
AMORTISATION
MEUR
2020
2019
Depreciation
and
amortisation
according
to
plan
Other
long-term
expenditure
-2
-3
Machinery
and
equipment
-2
-1
Total
depreciation
according
to
plan
-5
-4
Tax
depreciations
-5
-4
Depreciation
difference
Depreciation
difference
on
1
January
1
1
Depreciation
difference
on
31
December
1
1
4.
FINANCIAL
INCOME
AND
EXPENSES
MEUR
2020
2019
Dividend
income
From
Group
companies
301
304
Total
301
304
Other
interest
income
From
Group
companies
27
34
From
other
companies
1
1
Total
29
35
Other
financial
income
From
Group
companies
23
32
From
other
companies
12
22
Total
35
55
Exchange
gains
and
losses
-2
1
Interest
expenses
To
Group
companies
-4
-6
To
other
companies
-8
-8
This
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Wärtsilä
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Sustainability
/
Governance
/
Financial
review
Total
-12
-14
Other
financial
expenses
To
Group
companies
-18
-32
To
other
companies
-28
-45
Total
-46
-77
Financial
income
and
expenses,
total
305
304
5.
INCOME
TAXES
MEUR
2020
2019
Income
taxes
For
the
financial
period
-3
-3
Total
-3
-3
6.
FIXED
ASSETS
Intangible
assets
MEUR
Other
long
-term
expenditur
es
Intangible
assets
and
constructio
n
in
progress
Total
2020
Total
2019
Acquisition
cost
at
1
January
123
1
124
125
Additions
1
1
2
Disposals
-6
-7
-3
Acquisition
cost
at
31
December
117
1
118
124
Accumulated
amortisation
at
1
January
-113
-113
-113
Accumulated
amortisation
on
disposals
and
other
changes
6
6
3
Amortisation
during
the
financial
period
-2
-2
-3
Accumulated
amortisation
at
31
December
-109
-109
-113
Carrying
amount
at
31
December
2020
8
1
9
Carrying
amount
at
31
December
2019
10
1
11
Tangible
assets
MEUR
Land
and
water
Buildings
and
structures
Machinery,
equipment
and
other
tangible
assets
Total
2020
Total
2019
Acquisition
cost
at
1
January
7
2
8
17
17
Additions
2
3
Disposals
-4
-4
Acquisition
cost
at
31
December
2
2
11
15
17
Accumulated
depreciation
at
1
January
-2
-3
-4
-3
Amortisation
during
the
financial
period
-2
-2
-1
Accumulated
depreciation
at
31
December
-1
-5
-6
-4
Carrying
amount
at
31
December
2020
2
6
9
Carrying
amount
at
31
December
2019
7
6
13
This
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Sustainability
/
Governance
/
Financial
review
Shares
and
securities
MEUR
Shares
in
Group
companies
Shares
in
other
companies
Total
2020
Total
2019
Acquisition
cost
at
1
January
950
1
951
951
Acquisition
cost
at
31
December
950
2
951
951
Carrying
amount
at
31
December
2020
950
2
951
Carrying
amount
at
31
December
2019
950
1
951
7.
NON-CURRENT
RECEIVABLES
MEUR
2020
2019
Receivables
from
Group
companies
Loan
receivables
90
100
Total
90
100
8.
CURRENT
RECEIVABLES
FROM
GROUP
COMPANIES
MEUR
2020
2019
Trade
receivables
27
24
Loan
receivables
1,790
2,135
Derivatives
25
27
Other
receivables
2
Prepaid
expenses
and
accrued
income
3
7
Total
1,846
2,193
9.
PREPAID
EXPENSES
AND
ACCRUED
INCOME
MEUR
2020
2019
Derivatives
37
24
Other
4
5
Total
41
29
10.
SHAREHOLDERS’
EQUITY
MEUR
2020
2019
Share
capital
Share
capital
on
1
January
336
336
Share
capital
on
31
December
336
336
Share
premium
reserve
Share
premium
reserve
on
1
January
61
61
Share
premium
reserve
on
31
December
61
61
Retained
earnings
Retained
earnings
on
1
January
994
1038
Dividends
paid
-284
-284
Result
for
the
financial
period
265
240
Retained
earnings
on
31
December
974
994
Total
shareholders'
equity
1371
1391
Distributable
equity
974
994
This
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/
Sustainability
/
Governance
/
Financial
review
11.
LIABILITIES
MEUR
2020
2019
Non
-current
Interest
-bearing
953
847
Total
953
847
Current
Non
-interest
-bearing
108
96
Interest
-bearing
1,202
1,060
Total
1,310
1,155
Debt
with
maturity
profile
MEUR
2020
2019
Loans
from
financial
institutions:
1,084
899
Current
<1
year
130
51
Long
-term
1-5
years
661
519
>5
years
292
328
Total
1,084
899
12.
ACCRUED
EXPENSES
AND
DEFERRED
INCOME
MEUR
2020
2019
Derivatives
27
23
Personnel
costs
9
6
Interest
and
other
financial
items
3
3
Other
4
4
Total
44
36
13.
LIABILITIES
TO
GROUP
COMPANIES
MEUR
2020
2019
Trade
payables
13
15
Other
current
liabilities
1,072
1,008
Derivatives
43
25
Accrued
expenses
and
deferred
income
1
4
Total
1,129
1,052
14.
FINANCIAL
ASSETS
AND
LIABILITIES
BY
MEASUREMENT
CATEGORY
2020
MEUR
Measured
at
amortised
cost
At
fair
value
through
the
statement
of
income
Carrying
amounts
of
the
statement
of
financial
position
items
Fair
value
Non
-current
financial
assets
Interest
-bearing
receivables
from
Group
companies
90
90
90
Other
receivables
Current
financial
assets
Interest
-bearing
receivables
from
Group
companies
1,790
1,790
1,790
Trade
receivables
1
1
1
Trade
receivables
from
Group
companies
27
27
27
Derivatives
37
37
37
Derivatives
from
Group
companies
25
25
25
Other
receivables
from
Group
companies
3
3
3
Cash
equivalents
332
332
332
Cash
and
bank
367
367
367
Carrying
amount
by
category
2,610
63
2,673
2,673
Non
-current
financial
liabilities
Interest
-bearing
debt
953
953
963
Current
financial
liabilities
This
is
Wärtsilä
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Sustainability
/
Governance
/
Financial
review
Interest
-bearing
debt
130
130
130
Interest
-bearing
debt
to
Group
companies
1,072
1,072
1,072
Trade
payables
6
6
6
Trade
payables
to
Group
companies
13
13
13
Derivatives
27
27
27
Derivatives
to
Group
companies
43
43
43
Other
liabilities
3
3
3
Carrying
amount
by
category
2,177
70
2,247
2,257
2019
MEUR
Measured
at
amortised
cost
At
fair
value
through
the
statement
of
income
Carrying
amounts
of
the
statement
of
financial
position
items
Fair
value
Non
-current
financial
assets
Interest
-bearing
receivables
from
Group
companies
100
100
100
Other
receivables
1
1
1
Current
financial
assets
Interest
-bearing
receivables
from
Group
companies
2,135
2,135
2,135
Trade
receivables
from
Group
companies
24
24
24
Derivatives
24
24
24
Derivatives
from
Group
companies
27
27
27
Other
receivables
from
Group
companies
6
6
6
Cash
equivalents
Cash
and
bank
113
113
113
Carrying
amount
by
category
2,379
51
2,430
2,430
Non
-current
financial
liabilities
Interest
-bearing
debt
847
847
856
Current
financial
liabilities
Interest
-bearing
debt
52
52
52
Interest
-bearing
debt
to
Group
companies
1,008
1,008
1,008
Trade
payables
14
14
14
Trade
payables
to
Group
companies
15
15
15
Derivatives
23
23
23
Derivatives
to
Group
companies
25
25
25
Other
liabilities
3
3
3
Carrying
amount
by
category
1,940
49
1,988
1,996
Information
about
the
fair
value
hierarchy
and
valuation
principle
can
be
found
in
Consolidated
Financial
Statements
Note
5.2.
Financial
assets
and
liabilities
by
measurement
category.
This
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/
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/
Governance
/
Financial
review
15.
DERIVATIVE
FINANCIAL
INSTRUMENTS
2020
MEUR
With
external
financial
institutions
With
Group
companies
Total
2020
Nominal
values
of
derivative
financial
instruments
Currency
forwards,
transaction
risk
1,649
1,861
3,509
Interest
rate
swaps
450
130
580
Cross
currency
swaps
237
237
Total
4,327
Fair
values
of
derivative
financial
instruments
(level
2)
Currency
forwards,
transaction
risk
34
-23
11
Interest
rate
swaps
-12
6
-6
Cross
currency
swaps
-12
-12
Total
-8
2019
MEUR
With
external
financial
institutions
With
Group
companies
Total
2019
Nominal
values
of
derivative
financial
instruments
Currency
forwards,
transaction
risk
2,358
2,448
4,806
Interest
rate
swaps
400
130
530
Cross
currency
swaps
246
246
Total
5,582
Fair
values
of
derivative
financial
instruments
(level
2)
Currency
forwards,
transaction
risk
11
11
Interest
rate
swaps
-7
2
-6
Cross
currency
swaps
-4
-4
Total
2
Foreign
currency
forward
contracts
are
against
transactional
risks
and
are
matched
against
the
hedged
cashflows.
Interest
rate
swaps
are
denominated
in
euros
and
the
average
interest
-bearing
period
for
external
contracts
is
59
(69)
months
and
125
(137)
months
for
intragroup
contracts.
The
average
maturity
for
cross
currency
swaps
is
30
(41)
months.
16.
FINANCIAL
RISKS
General
Wärtsilä
has
a
centralised
Group
Treasury
with
two
main
objectives:
1)
to
arrange
adequate
funding
for
the
Group’s
underlying
operations
on
competitive
terms
and
2)
to
identify
and
evaluate
the
financial
risks
within
the
Group
and
implement
the
hedges
for
the
Group
companies.
The
Group
Treasury
is
organisationally
within
the
Parent
Company.
The
details
about
the
management
of
the
Group's
financial
risks
are
in
Note
5.8.
of
the
Consolidated
Financial
statements.
As
the
Group's
liquidity
and
interest
rate
risks
are
managed
at
the
parent
company
level
the
group
reporting
applies
fully
to
the
Parent
Company.
Foreign
exchange
risk
Operative
foreign
currency
risks
are
followed
and
hedged
at
the
subsidiary
level.
The
Group
Treasury
acts
as
a
counterparty
to
these
hedges,
if
that
is
allowed
by
local
regulations.
To
enable
netting
of
intragroup
currency
flows
and
to
reduce
the
amount
of
external
transactions
the
Group
Treasury
is
allowed
to
have
minor
unhedged
exposures
in
different
currencies.
Any
gains/losses
from
the
Group
Treasury's
operations
are
booked
directly
into
the
financial
items
and
we
do
not
expect
any
material
foreign
exchange
gains/losses
from
the
Group
Treasury's
operations.
17.
COLLATERAL,
CONTINGENT
LIABILITIES
AND
OTHER
COMMITMENTS
MEUR
2020
2019
Guarantees
and
contingent
liabilities
On
behalf
of
Group
companies
2,889
2,773
Total
2,889
2,773
Future
nominal
lease
payments
Payable
within
one
year
4
4
Payable
after
one
year
26
29
Total
30
33
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
18.
RELATED
PARTY
LOANS
AND
OTHER
COMMITMENTS
There
are
no
loans
receivables
from
senior
management
and
the
members
of
the
Board
of
Directors.
No
pledges
or
other
commitments
were
given
on
behalf
of
senior
management
or
shareholders.
In
Note
7.2
in
Consolidated
Financial
Statements,
related
party
disclosures
are
specified.
Related
parties
comprise
the
Board
of
Directors,
the
President
and
CEO,
the
Board
of
Management
as
well
as
the
associated
companies
and
joint
ventures.
In
Notes
8
and
13
in
Parent
Company
financial
statement,
receivables
and
liabilities
from
Group
companies
are
specified.
19.
AUDITORS’
FEES
AND
SERVICES
The
following
fees
were
paid
to
auditors
and
accounting
firms
for
audits
and
other
services.
In
2020,
the
AGM
appointed
the
audit
firm
PricewaterhouseCoopers
Oy
as
Wärtsilä
Corporati
on's
auditor.
Auditors'
fees
TEUR
2020
2019
Audit
341
583
Tax
advisory
10
Other
services
14
111
Total
355
705
This
is
Wärtsilä
/
Sustainability
/
Governance
/
Financial
review
PROPOSAL
OF
THE
BOARD
The
parent
company’s
distributable
funds
total
EUR
974
,008,736.28,
which
includes
EUR
2
64,838,387.72
in
net
profit
for
the
year.
There
are
591,723,390
shares
with
dividend
rights.
The
Board
of
Directors
proposes
to
the
Annual
General
Meeting
that
the
company’s
distributable
earnings
be
disposed
of
in
the
following
way:
EUR
A
dividend
of
EUR
0.20
per
share
be
paid,
making
a
total
of
118
344
678.00
That
the
following
sum
be
retained
in
shareholders’
equity
855
664
058.28
Totalling
974
008
736.28
The
dividend
shall
be
paid
in
two
instalments.
The
first
instalment
of
EUR
0.10
per
share
shall
be
paid
to
the
shareholders
who
are
registered
in
the
list
of
shareholders
maintained
by
Euroclear
Finland
Ltd
on
the
dividend
record
date
of
8
March
2021.
The
payment
day
proposed
by
the
Board
for
this
instalment
is
15
March
2021.
The
second
instalment
of
EUR
0.10
per
share
shall
be
paid
in
September
2021.
The
second
instalment
of
the
dividend
shall
be
paid
to
shareholders
who
are
registered
in
the
list
of
shareholders
maintained
by
Euroclear
Finland
Ltd
on
the
dividend
record
day,
which,
together
with
the
payment
day,
shall
be
decided
by
the
Board
of
Directors
in
its
meeting
scheduled
for
9
September
2021.
The
dividend
record
day
for
the
second
instalment
as
per
the
curren
t
rules
of
the
Finnish
book
-entry
system
would
be
13
September
2021
and
the
dividend
payment
day
20
September
2021
No
significant
changes
have
taken
place
in
the
company’s
financial
position
since
the
end
of
the
financial
year.
The
company’s
liquidity
is
good
and
in
the
opinion
of
the
Board
of
Directors
the
proposed
dividend
will
not
put
the
company’s
solvency
at
risk.
Helsinki,
Finland,
27
January
2021
Tom
Johnstone
Markus
Rauramo
Maarit
Aarni
-
Sirviö
Karen
Bomba
Karin
Falk
Johan
Forssell
Risto
Murto
Mats
Rahmström
Jaakko
Eskola,
President
and
CEO
Auditor’s
Report
(Translation
of
the
Finnish
Original)
To
the
Annual
General
Meeting
of
Wärtsilä
Corporation
Report
on
the
Audit
of
the
Financial
S
tatements
Opinion
In
our
opinion
●
the
consolidated
financial
statements
give
a
true
and
fair
view
of
the
group’s
financial
position
and
financial
performance
and
cash
flows
in
accordance
with
International
Financial
Reporting
Standards
(IFRS)
as
adopted
by
the
EU
●
the
financial
statements
give
a
true
and
fair
view
of
the
parent
company’s
financial
performance
and
financial
position
in
accordance
with
the
laws
and
regulations
governing
the
preparation
of
the
financial
statements
in
Finland
and
comply
with
statutory
requirements.
Our
opinion
is
consistent
wit
h
the
additional
report
to
the
Audit
Committee.
What
we
have
audited
We
have
audited
the
financial
statements
of
Wärtsilä
Corporation
(business
identity
code
0128631-1)
for
the
year
ended
31
December
2020.
The
financial
statements
comprise:
●
the
consolidated
balance
sheet,
income
statement,
statement
of
comprehensive
income,
statement
of
changes
in
equity,
statement
of
cash
flows
and
notes,
including
a
summary
of
significant
accounting
policies
●
the
parent
company’s
balance
sheet,
income
statement,
statement
of
cash
flows
and
notes.
Basis
for
O
pinion
We
conducted
our
audit
in
accordance
with
good
auditing
practice
in
Finland.
Our
responsibilities
under
good
auditing
practice
are
further
described
in
the
Auditor’s
R
esponsibilities
for
the
Audit
of
the
Financial
Statements
section
of
our
report.
We
believe
that
the
audit
evidence
we
have
obtained
is
sufficient
and
appropriate
to
provide
a
basis
for
our
opinion.
Independence
We
are
independent
of
the
parent
company
and
of
the
group
companies
in
accordance
with
the
ethical
requirements
that
are
applicable
in
Finland
and
are
relevant
to
our
audit,
and
we
have
fulfilled
our
other
ethical
responsibilities
in
accordance
with
these
requirements.
To
the
best
of
our
knowledge
and
belief,
the
non-audit
services
that
we
have
provided
to
the
parent
company
and
to
the
group
companies
are
in
accordance
with
the
applicable
law
and
regulations
in
Finland
and
we
have
not
provided
non-audit
services
that
are
prohibited
under
Article
5(1)
of
Regulation
(EU)
No
537/2014.
The
non-audit
services
that
we
have
provided
are
disclosed
in
note
7.3
to
the
Financial
Statements.
Our
Audit
A
pproach
Overview
●
We
have
applied
an
overall
group
materiality
of
€
20
million.
●
The
group
audit
scope
included
Wärtsilä
Corporation
parent
company
and
all
significant
operating
companies,
as
well
as
a
large
number
of
smaller
companies,
covering
the
vast
majority
of
revenues,
assets
and
liabilities.
●
Revenue
recognition
of
long-term
contracts
●
Valuation
of
goodwill
●
Valuation
of
trade
receivables
As
part
of
designing
our
audit,
we
determined
materiality
and
assessed
the
risks
of
material
misstatement
in
the
financial
statements.
In
particular,
we
considered
where
management
made
subjective
judgements;
for
example,
in
respect
of
significant
accounting
estimates
that
involved
making
assumptions
and
considering
future
events
that
are
inherently
uncertain.
Materiality
The
scope
of
our
audit
was
influenced
by
our
application
of
materiality.
An
audit
is
designed
to
obtain
reasonable
assurance
whether
the
financial
statements
are
free
from
material
misstatement.
Misstatements
may
arise
due
to
fraud
or
error.
They
are
considered
material
if
individually
or
in
aggregate,
they
could
reasonably
be
expected
to
influence
the
economic
decisions
of
users
taken
on
the
basis
of
the
financial
statements.
Based
on
our
professional
judgement,
we
determined
certain
quantitative
thresholds
for
materiality,
including
the
overall
group
materiality
for
the
consolidated
financial
statements
as
set
out
in
the
table
below.
These,
together
with
qualitative
considerations,
helped
us
to
determine
the
scope
of
our
audit
and
the
nature,
timing
and
extent
of
our
audit
procedures
and
to
evaluate
the
effect
of
misstatements
on
the
financial
statements
as
a
whole.
Overall
group
materiality
€
2
0
million
(prior
year
€
24
million)
How
we
determined
it
5
%
of
profit
before
tax
(five-year
average)
Rationale
for
the
materiality
benchmark
applied
We
chose
profit
before
tax
as
the
benchmark
because,
in
our
view,
the
performance
of
the
Group
is
most
commonly
measured
by
using
this
criteria,
and
it
is
a
generally
accepted
benchmark.
We
chose
5
%
which
is
within
the
range
of
acceptable
quantitative
materiality
thresholds
in
auditing
standards.
How
we
tailored
our
group
audit
scope
The
group
audit
scope
was
tailored
to
take
into
account
the
structure
of
the
Group
and
the
size,
complexity
and
risk
of
individual
subsidiaries.
Using
this
criteria
we
selected
companies
and
accounts
into
our
audit
scope
and
at
the
same
time
ensured
that
we
get
sufficient
coverage
to
our
audit,
in
order
to
issue
an
audit
opinion
for
the
Group.
Key
Audit
Matters
Key
audit
matters
are
those
matters
that,
in
our
professional
judgment,
were
of
most
significance
in
our
audit
of
the
financial
statements
of
the
current
period.
These
matters
were
addressed
in
the
context
of
our
audit
of
the
financial
statements
as
a
whole,
and
in
forming
our
opinion
thereon,
and
we
do
not
provide
a
separate
opinion
on
these
matters.
As
in
all
of
our
audits,
we
also
addressed
the
risk
of
management
override
of
internal
controls,
including
among
other
matters
consideration
of
whether
there
was
evidence
of
bias
t
hat
represented
a
risk
of
material
misstatement
due
to
fraud.
Key
audit
matter
in
the
audit
of
the
group
How
our
audit
addressed
the
key
audit
matter
Revenue
recognition
of
long-term
contracts
Refer
to
the
consolidated
financial
statements
note
2.2
.
The
group
has
significant
revenue
from
construction
contracts
and
long-term
operating
and
maintenance
agreements.
These
long-term
contracts
are
often
complex
customised
solutions
and
meet
the
definition
for
revenue
recognition
over
time
in
accordance
with
IFRS
15.
Revenue
related
to
these
construction
contracts
and
long-
term
operating
and
maintenance
agreements
is
recognised
using
the
percentage
of
completion
method,
where
progress
is
determined
by
comparing
actual
costs
incurred
to
date,
with
the
total
estimated
costs
of
the
project.
Revenue
recognition
for
long-term
contracts
includes
Our
revenue
testing
included
both
testing
of
the
company’s
controls,
as
well
as
substantive
audit
procedures
targeted
at
selected
major
long-term
projects.
Our
substantive
testing
focused
on
estimates
applied
by
management
in
the
accounting.
Our
procedures
included,
among
others
things,
the
following:
-
Ensured
that
the
revenue
recognition
method
applied
was
appropriate
based
on
the
terms
of
the
arrangement;
-
Agreed
the
total
project
revenue
estimates
to
sales
agreements,
including
amendments
as
appropriate;
-
We
obtained
an
understanding
of
the
processes
and
tested
relevant
controls,
which
impact
the
revenue
recognition;
-
We
assessed
the
reliability
of
management’s
estimates
by
comparing
the
actual
results
of
delivered
projects
to
previous
estimates;
management
judgment
in
a
form
of
estimates,
which
are
subject
to
management
experience
and
expectations
of
future
events.
The
most
important
judgment
relates
to
the
estimated
total
costs
of
the
project.
Revenue
recognition
of
long-term
contracts
is
a
key
audit
matter
in
the
audit
due
to
the
high
level
of
management
judgement
involved
in
the
project
estimates.
-
We
challenged
the
management
estimates
and
assumptions
in
projects,
which
were
considered
to
include
specific
risk
factors;
and
-
Recalculated
the
revenue
based
on
the
stage
of
completion
of
the
projects.
Ensured
that
the
stage
of
completion
is
correct
by
comparing
actual
costs
per
the
company’s
accounting
records
to
the
estimated
total
costs
of
the
projects.
Valuation
of
goodwill
Refer
to
the
consolidated
financial
statements
note
3.1.
Goodwill
is
one
of
the
most
significant
balance
sheet
items
and
amounts
to
€
1
325
million.
The
determination
and
whether
an
impairment
charge
is
required
involves
significant
management
judgement,
including
identifying
on
which
cash
generating
unit
level
the
goodwill
is
tested
and
estimating
the
future
performance
of
the
business
and
the
discount
rate
applied
to
these
future
cash
flows.
Valuation
of
goodwill
is
a
key
audit
matter
in
the
audit
due
to
the
size
of
the
goodwill
balance
and
the
high
Our
audit
focused
on
assessing
the
reasonableness
of
the
determination
of
cash
generating
units,
which
forms
the
basis
for
the
goodwill
impairment
testing
and
assessing
the
appropriateness
of
management’s
judgments
and
estimates
used
in
the
goodwill
impairment
analysis.
Our
procedures
relating
to
the
impairment
analysis
included
the
following:
-
We
tested
the
methodology
applied
in
the
goodwill
impairment
analysis
as
compared
to
the
requirements
of
IAS
36,
Impairment
of
Assets;
-
We
evaluated
the
process
by
which
the
future
cash
flow
forecasts
were
drawn
up,
including
comparing
them
to
the
latest
Board
approved
targets
and
long
term
plans;
level
of
management
judgement
involved.
-
We
tested
the
key
underlying
assumptions
for
the
cash
flow
forecasts,
including
sales
and
profitability
forecasts,
discount
rate
used
and
the
implied
growth
rates
beyond
the
forecasted
period;
-
We
compared
the
current
year
actual
results
included
in
the
prior
year
impairment
model
to
consider
whether
forecasts
included
assumptions
that,
with
hindsight,
had
been
optimistic;
and
-
We
considered
whether
the
sensitivity
analysis
performed
by
the
management
around
key
assumptions
of
the
cash
flow
forecast
was
appropriate
by
considering
the
likelihood
of
the
movements
of
these
key
assumptions.
Valuation
of
trade
receivables
Refer
to
the
consolidated
financial
statements
note
4.2
.
Net
trade
receivables
amount
to
€
952
million,
including
an
impairment
provision
of
€
61
million.
The
trade
receivables
include
€
30
million
long-term
trade
receivables.
Trade
receivables
are
recognised
at
their
anticipated
realisable
value,
which
is
the
original
invoiced
For
trade
receivables
and
the
management’s
estimations
for
trade
receivables
impairment
provision,
our
key
audit
procedures
included
the
following:
-
We
obtained
trade
receivables
balance
confirmations;
-
We
analysed
the
aging
of
trade
receivables;
and
-
We
obtained
a
list
of
long
outstanding
receivables
and
assessed
the
recoverability
of
these
through
inquiry
with
management
and
by
obtaining
amount
less
an
estimated
valuation
allowance.
Valuation
of
trade
receivables
is
a
key
audit
matter
in
the
audit
due
to
the
size
of
the
trade
receivable
balance
and
the
high
level
of
management
judgement
used
in
determining
the
impairment
provision.
sufficient
corroborative
evidence
to
support
the
conclusions.
We
have
no
key
audit
matters
to
report
with
respect
to
our
audit
of
the
parent
company
financial
statements.
There
are
no
significant
risks
of
material
misstatement
referred
to
in
Article
10(2c)
of
Regulation
(EU)
No
537/2014
with
respect
to
the
consolidated
financial
statements
or
the
parent
company
financial
statements.
Responsibilities
of
the
Board
of
Directors
and
the
Managing
Director
for
the
Financial
Statements
The
Board
of
Directors
and
the
Managing
Director
are
responsible
for
the
preparation
of
consolidated
financial
statements
that
give
a
true
and
fair
view
in
accordance
with
International
Financial
Reporting
Standards
(IFRS)
as
adopted
by
the
EU,
and
of
financial
statements
that
give
a
true
and
fair
view
in
accordance
with
the
laws
and
regulations
governing
the
preparation
of
financial
statements
in
Finland
and
comply
with
statutory
requirements.
The
Board
of
Directors
and
the
Managing
Director
are
also
responsible
for
such
internal
control
as
they
determine
is
necessary
to
enable
the
preparation
of
financial
statements
that
are
free
from
material
misstatement,
whether
due
to
fraud
or
error.
In
preparing
the
financial
statements,
the
Board
of
Directors
and
the
Managing
Director
are
responsible
for
assessing
the
parent
company’s
and
the
group’s
ability
to
continue
as
a
going
concern,
disclosing,
as
applicable,
matters
relating
to
going
concern
and
using
the
going
concern
basis
of
accounting.
The
financial
statements
are
prepared
using
the
going
concern
basis
of
accounting
unless
there
is
an
intention
to
liquidate
the
parent
company
or
the
group
or
to
cease
operations,
or
there
is
no
realistic
alternative
but
to
do
so.
Auditor’s
Responsibilities
for
the
A
udit
of
the
Financial
Statements
Our
objectives
are
to
obtain
reasonable
assurance
about
whether
the
financial
statements
as
a
whole
are
free
from
material
misstatement,
whether
due
to
fraud
or
error,
and
to
issue
an
auditor’s
report
that
includes
our
opinion.
Reasonable
assurance
is
a
high
level
of
assurance,
but
is
not
a
guarantee
that
an
audit
conducted
in
accordance
with
good
auditing
practice
will
always
detect
a
material
misstatement
when
it
exists.
Misstatements
can
arise
from
fraud
or
error
and
are
considered
material
if,
individually
or
in
the
aggregate,
they
could
reasonably
be
expected
to
influence
the
economic
decisions
of
users
taken
on
the
basis
of
these
financial
statements.
As
part
of
an
audit
in
accordance
with
good
auditing
practice,
we
exercise
professional
judgment
and
maintain
professional
skepticism
throughout
the
audit.
We
also:
●
Identify
and
assess
the
risks
of
material
misstatement
of
the
financial
statements,
whether
due
to
fraud
or
error,
design
and
perform
audit
procedures
responsive
to
those
risks,
and
obtain
audit
evidence
that
is
sufficient
and
appropriate
to
provide
a
basis
for
our
opinion.
The
risk
of
not
detecting
a
material
misstatement
resulting
from
fraud
is
higher
than
for
one
resulting
from
error,
as
fraud
may
involve
collusion,
forgery,
intentional
omissions,
misrepresentations,
or
the
override
of
internal
control.
●
Obtain
an
understanding
of
internal
control
relevant
to
the
audit
in
order
to
design
audit
procedures
that
are
appropriate
in
the
circumstances,
but
not
for
the
purpose
of
expressing
an
opinion
on
the
effectiveness
of
the
parent
company’s
or
the
group’s
internal
control.
●
Evaluate
the
appropriateness
of
accounting
policies
used
and
the
reasonableness
of
accounting
estimates
and
related
disclosures
made
by
management.
●
Conclude
on
the
appropriateness
of
the
Board
of
Directors’
and
the
Managing
Director’s
use
of
the
going
concern
basis
of
accounting
and
based
on
the
audit
evidence
obtained,
whether
a
material
uncertainty
exists
related
to
events
or
conditions
that
may
cast
significant
doubt
on
the
parent
company’s
or
the
group’s
ability
to
continue
as
a
going
concern.
If
we
conclude
that
a
material
uncertainty
exists,
we
are
required
to
draw
attention
in
our
auditor’s
report
to
the
related
disclosures
in
the
financial
statements
or,
if
such
disclosures
are
inadequate,
to
modify
our
opinion.
Our
conclusions
are
based
on
the
audit
evidence
obtained
up
to
the
date
of
our
auditor’s
report.
However,
future
events
or
conditions
may
cause
the
parent
company
or
the
group
to
cease
to
continue
as
a
going
concern.
●
Evaluate
the
overall
presentation,
structure
and
content
of
the
financial
statements,
including
the
disclosures,
and
whether
the
financial
statements
represent
the
underlying
transactions
and
events
so
that
the
financial
statements
give
a
true
and
fair
view.
●
Obtain
sufficient
appropriate
audit
evidence
regarding
the
financial
information
of
the
entities
or
business
activities
within
the
group
to
express
an
opinion
on
the
consolidated
financial
statements.
We
are
responsible
for
the
direction,
supervision
and
performance
of
the
group
audit.
We
remain
solely
responsible
for
our
audit
opinion.
We
communicate
with
those
charged
with
governance
regarding,
among
other
matters,
the
planned
scope
and
timing
of
the
audit
and
significant
audit
findings,
including
any
significant
deficiencies
in
internal
control
that
we
identify
during
our
audit.
We
also
provide
those
charged
with
governance
with
a
statement
that
we
have
complied
with
relevant
ethical
requirements
regarding
independence,
and
to
communicate
with
them
all
relationships
and
other
matters
that
may
reasonably
be
thought
to
bear
on
our
independence,
and
where
applicable,
related
safeguards.
From
the
matters
communicated
with
those
charged
with
governance,
we
determine
those
matters
that
were
of
most
significance
in
the
audit
of
the
financial
statements
of
the
current
period
and
are
therefore
the
key
audit
matters.
We
describe
these
matters
in
our
auditor’s
report
unless
law
or
regulation
precludes
public
disclosure
about
the
matter
or
when,
in
extremely
rare
circumstances,
we
determine
that
a
matter
should
not
be
communicated
in
our
report
because
the
adverse
consequences
of
doing
so
would
reasonably
be
expected
to
outweigh
the
public
interest
benefits
of
such
communication.
Other
Reporting
R
equirements
Appointment
We
were
first
appointed
as
auditors
by
the
annual
general
meeting
on
2
March
2017
.
Our
appointment
represents
a
total
period
of
uninterrupted
engagement
of
four
years.
Other
I
nformation
The
Board
of
Directors
and
the
Managing
Director
are
responsible
for
the
other
information.
The
other
information
comprises
the
report
of
the
Board
of
Directors
and
the
information
included
in
the
Annual
Report,
but
does
not
include
the
financial
statements
and
our
auditor’s
report
thereon.
Our
opinion
on
the
financial
statements
does
not
cover
the
other
information.
In
connection
with
our
audit
of
the
financial
statements,
our
responsibility
is
to
read
the
other
information
and,
in
doing
so,
consider
whether
the
other
information
is
materially
inconsistent
with
the
financial
statements
or
our
knowledge
obtained
in
the
audit,
or
otherwise
appears
to
be
materially
misstated.
With
respect
to
the
report
of
the
Board
of
Directors,
our
responsibility
also
includes
considering
whether
the
report
of
the
Board
of
Directors
has
been
prepared
in
accordance
with
the
applicable
laws
and
regulations.
In
our
opinion
●
the
information
in
the
report
of
the
Board
of
Directors
is
consistent
with
the
information
in
the
financial
statements
●
the
report
of
the
Board
of
Directors
has
been
prepared
in
accordance
with
the
applicable
laws
and
regulations.
If,
based
on
the
work
we
have
performed,
we
conclude
that
there
is
a
material
misstatement
of
the
other
information,
we
are
required
to
report
that
fact.
We
have
nothing
to
report
in
this
regard.
Other
Statements
We
support
that
the
financial
statements
should
be
adopted.
The
proposal
by
the
Board
of
Directors
regarding
the
use
of
the
distributable
funds
is
in
compliance
with
the
Limited
Liability
Companies
Act.
We
support
that
the
Members
of
the
Board
of
Directors
and
the
President
and
CEO
should
be
discharged
from
liability
for
the
financial
period
audited
by
us.
Helsinki
5
February
202
1
PricewaterhouseCoopers
Oy
Authorised
Public
Accountants
Merja
Lindh
Authorised
Public
Accountant
(KHT)