#11 © Wärtsilä WÄRTSILÄ IN CHINA Goldman Sachs Industrials China Tour TIMO KOPONEN VICE PRESIDENT, FINANCE & CONTROL, SHIP POWER 21.9.2011 WÄRTSILÄ#22 This is Wärtsilä © Wärtsilä 15 4220 NORMAND SEVEN SHIP POWER POWER PLANTS SERVICES WÄRTSILÄ#33 © Wärtsilä 50% 40% 30% 20% 10% 0% 1971 1972 1973- 1974- 1975- 70% 60% 100% 90% 80% 1976- 1977 1978- 1979 - 1980- 1981 1982- Source: Wärtsilä's Marine Market Database (MMDB) China has gained the top builder position for merchant vessels 1983- 1984- 1985 1986- 1987- China Japan Korea 1988- 1989 Merchant vessels: contracting volumes (DWT), share by region 1990 - 1991 1992- 1993- Other Asia 1994 1995- 1996- 1997 1998- 1999- Europe Rest of the World 2000- 2001 2002 2003- 2004- 2005- 2006 2007 2008 2009- 2010 WÄRTSILÄ#44 © Wärtsilä 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1991 1992 1993 1994 1995 1996 1997 1998 ...but is also pushing in other vessel segments Offshore vessels: contracting volumes (GT), share by region 1999 2000- 2001- 2002- 2003 2004- 2005- 2006- 2007- 2008- 2009- ■China Japan Korea Other Asia Europe Rest of the World *Special includes: cruise, ferries (ropax and pax only), dredgers, and tugs Source: Wärtsilä's Marine Market Database (MMDB) 2010 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1991 1992 1993 1994 1995 1996 1997 1998 1999- Special* vessels: contracting volume (GT), share by region 2000 2001 2002 2003 China Japan Korea Other Asia Europe Rest of the World 2004 2005 2006 2007 2008 2009- 2010 WÄRTSILÄ#5Ship yard landscape in China According to OECD, in the past state run groups owned 3/5 of China's total shipbuilding capacity. Now the landscape is more diverse, and local privately owned companies account for the biggest share Number of yards 2011 Contracting, DWT Order book, DWT 4% 5% 3% 8% 22% 1% 60% 69% 88% Source: Clarkson Research Services 5 © Wärtsilä CSIC CSSC JV ■Local 15% 3% 22% WÄRTSILÄ#6DWT % Customers behavior: ship owners Who orders in China? • At a global level, ship owning is shifting, with Chinese owners growing their fleets and importance in the shipping landscape • Chinese owners prefer to order from Chinese yards Contracting activity in Chinese yards, by ship owner country 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2001 2002 2003 2004 2005 2006 Contracting year 2007 2008 2009 2010 ■CHINA ■GREECE GERMANY THONG KONG ■SINGAPORE ■DENMARK UNITED STATES ■ITALY Source: Marine Market Database 6 © Wärtsilä WÄRTSILÄ#7• • Customer behavior: ship yards Building regions have a very different mix of ship types built China is pushing to change this mix 100% 90% 80% 70% 60% 5 50% 40% 30% 20% 10% 0% 7 © Wärtsilä China Order book mix by shipbuilding region Japan Korea Rest of Asia Europe Rest of the World Tankers Offshore ■Cruise & Ferry ■Other vessels ■Bulk Carriers ■Container Vessels ■Gas Tankers WÄRTSILÄ#8Competitive landscape is tough! Focus on gas as a fuel Optimized product portfolio Improved services network, offering and capabilities Amplified focus on developing economies Brazil China and other SE Increased capacity during boom years Using Ship Design capabilities as leverage Emission abatement as priority Increased focus on offshore Asia Rolls Wärtsilä MAN Caterpillar Royce Himsen Other* Ship Power's strategy is an excellent framework for success *Others include: Niigata, Yanmar, and other minor Asian players 8 © Wärtsilä WÄRTSILÄ#9China in the global shipbuilding context 32% Global order book (DWT), by ship building region 2% 2% 6%. 15% 43% ■China Japan Korea Other Asia Europe Rest of the World 9 © Wärtsilä Global contracting activity (DWT) 2011, by ship building region 49% 0% 4% 2% 3% 42% ■China Japan Korea Other Asia Europe Rest of the World WÄRTSILÄ#10Uncertainty ahead? The fundamentals show risks and opportunities • • Risks of downturn in global economy are tangible, also for Chinese economy High oil prices represent a risk towards global economic growth, however they also stimulate investments in exploration and production for oil and gas Expansion of emerging economies (including China) continues to support growth of demand for transportation of raw materials and energy • Highlights about the present • Earnings are at very low levels Overcapacity continues to cast shadows in main merchant segments The future brings interesting challenges! • Ship owners base is shifting and increasingly Chinese Increasing interest in the market for gas applications, Chinese yards' interest in gas fuelled vessels increasing Increasing focus on energy efficiency and environmental performance Increased need for a total performance approach ship design capabilities are crucial! 10 © Wärtsilä WÄRTSILÄ#11Wärtsilä in China today Wärtsilä Ventures WCN Dalian Rep. Office WCN Shanhaiguan Services WCN Beijing Rep. Office Qingdao Qiyao Wärtsilä MHI Linshan Marine Diesel Co Ltd (QMD) Low-speed engines 2-Stroke Engine Licensees Joint Ventures 11 © Wärtsilä Wärtsilä CME Zhenjiang Propeller Co., Ltd. FPPS, shaft lines, blades and hubs Cosco-Shipyard Total Automation Co Ltd Wärtsilä China head quarters Wärtsilä Services (Shanghai) Co Ltd Wärtsilä Ship Design (Shanghai) Co Ltd JV with Jiangsu CuiXing Marine Offshore Engineering Co. Ltd. Wärtsilä Qiyao Diesel Shanghai Co., Ltd. Wärtsilä Auxpac 20 and 26 gensets Wärtsilä Propulsion (Wuxi) Co., Ltd. TTS, LCTs, seals & bearings and components Wärtsilä Services (Shanghai) Co Ltd Nansha Office Wärtsilä China Ltd. (H.K) WARTSILA WARTSILA CME WÄRTSILÄ#1212 Wärtsilä's ambitions in China Defend our strong position in China and aggressively pursue further growth • Clear leadership for certain vessel types • Differentiated approach to customers • • Maximized synergies with Ship Design Improvements of competitiveness for auxiliary engines. • Further strengthening of local organization . New JV for 4-stroke engine manufacturing will be in operation in 2013 © Wärtsilä WÄRTSILÄ#13WÄRTSILÄ WARTSILA.COM IR Contact: Pauliina Tennilä Director, Investor Relations Tel. +358 (0) 40 570 5530 E-mail: [email protected]