Shares of Finnish power-plant manufacturer Wartsila experienced a significant boost following the release of better-than-expected third-quarter earnings. The company also announced a strategic review of its energy-storage business, adding to the positive sentiment. As of 1000 GMT, shares were trading 15% higher at EUR11.20, propelling Wartsila to the top of the Stoxx Europe 600 index.
Wartsila surpassed Vara Research consensus with third-quarter orders amounting to 1.79 billion euros ($1.9 billion), exceeding expectations by 9.6%. This growth can be attributed to strong demand in both service and equipment orders from its marine power unit, which specializes in ship engines. Although orders from container vessels were lower, the rebounding demand from cruise operators offset this decline. The company anticipates that demand for its overall marine unit will remain stable in the next 12 months.
While Wartsila experienced weakness in its energy division due to a decrease in thermal power plant and energy-storage equipment orders, the business saw a substantial increase in margins. The company remains optimistic about the unit's performance and expects improved demand over the next year.
Citi analyst Vivek Midha acknowledges concerns regarding thermal energy order intake, but emphasizes the significance of other areas of strength, particularly the recovery in the cruise sector. Midha notes that recent weakness in share prices should be counterbalanced by this positive development.
Wartsila's energy-storage business achieved breakeven status on a rolling 12-month basis during the quarter, generating nearly EUR1 billion in sales. Consequently, the company has initiated a strategic review of the business, exploring various ownership options.
"We have made solid progress in our energy storage and optimization business, and the market continues to exhibit remarkable growth," stated Wartsila Chief Executive Hakan Agnevall. "Thus, this is an opportune moment for us to assess future options and define the best way to support the business's growth and create shareholder value."
Citi's Midha highlights that some investors view this strategic review as encouraging. Although Citi has historically been skeptical of any breakup case related to storage, the potential for crystallizing value from the business has been a hopeful possibility for some optimists, according to Midha.
