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Waertsilae Falls on Forecast of No Sales, Margin Growth

Jan. 25 (Bloomberg) -- Waertsilae Oyj dropped the most in 3 1/2 months after fourth-quarter profit matched analyst estimates and the Finnish power-plant and ship-engine supplier said sales and profitability may not grow this year.

Waertsilae fell as much as 3.5 percent to 34.81 euros, the biggest intraday decline since Oct. 10, and was trading down 2.1 percent at 2:40 p.m. in Helsinki. Volume exceeded 80 percent of the three-month daily average.

Fourth-quarter net income for the maker of sulfur scrubbers for ship engines rose 38 percent from a year earlier to 123 million euros ($165 million), equaling the average of nine estimates compiled by Bloomberg during the past 28 days. Revenue may be unchanged or rise as much as 10 percent this year, while earnings before interest, taxes and one-time items may amount to 11 percent of sales, it said. That compares with a full-year margin of 11.1 percent in 2012.

“We expect a negative reaction to the stock due to recent rise in share price, which has lifted valuation multiples very high,” Pyry Kangas and Sauli Saumala, analysts at equity-research company Inderes Oy in Helsinki, said in a report to clients. Waertsilae’s price-to-earnings ratio is 20.6.

Waertsilae today also appointed SSAB AB Chief Financial Officer Marco Wiren as its new CFO starting Aug. 1.

The company isn’t worried about Japanese Prime Minister Shinzo Abe’s campaign to drive the yen lower or any wider implications in Asia, where it gets about 40 percent of revenue, Chief Executive Officer Bjoern Rosengren said in an interview at the manufacturer’s Helsinki headquarters.

“We invoice roughly 80 percent of our sales in euros, so we’re not so sensitive to fluctuations” in currency markets, Rosengren said. “The euro is still reasonably low, which makes our products competitive.”

New ship orders prompted by the European Union’s decision to tighten vessel-emissions regulations have developed more slowly than expected, he said. The European Commission approved a Finnish plan on Jan. 23 to provide government funds to adapt vessel engines to the new standards.

“Customers are a little hesitant and waiting, thinking which direction to take,” Rosengren said. “We are still optimistic. We only thought it would develop a bit quicker after the decision.”

Similar programs to Finland’s are unlikely to materialize in Sweden and Denmark, according to Jan Fritz Hansen from the Danish Shipowners’ Association and Carl Carlsson from the Swedish Shipping Association.

As the traditional merchant ship market is struggling with low profitability and utilization rates, Waertsilae is seeking customers in vessels serving the offshore energy industry.

“There probably won’t be a boom before 2015” in demand for maritime environmental equipment, Pekka Spolander, an analyst at Pohjola Bank Oyj said, in an interview. “There’s a clear shift in Waertsilae’s ship power business toward offshore vessels and away from cargo ships.”

To contact the reporter on this story: Kasper Viita in Helsinki at kviita1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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