October 23, 2018 / 5:55 AM / a year ago

Ship tech company Wartsila cuts services outlook after profit miss

HELSINKI (Reuters) - Finnish ship technology and power plant maker Wartsila (WRT1V.HE) reported lower than expected quarterly profit and orders on Tuesday and downgraded the demand outlook for its services division, sending its shares down more than 7 percent.

Services account for almost half of the company’s revenue and Wartsila has been waiting for a pick-up in demand for services from the marine sector as the global shipbuilding industry recovers from its lengthy downturn.

However, Wartsila said in its quarterly report that “transactional service activity remained on a lower than anticipated level in the merchant and offshore segments”, adding that weak service development was affecting the group sales mix and hampering profitability.

The power plant business, meanwhile, was hit by postponed investment decisions, it said.

Shares in the company were down 7.3 percent at 13.13 euros by 0748 GMT.

“This was indeed a disappointment and it was due to the service business,” said OP Bank analyst Pekka Spolander with an “accumulate” rating.

“Wartsila had already indicated that the profits would be focussed on the last quarter but I don’t believe it could make up for all (the shortcomings in previous quarters).”

Wartsila cut its full-year demand outlook for the service business to “solid” from “good” and repeated its forecast for “good” demand for the ship technology and energy businesses.

Total third-quarter adjusted operating profit rose 8 percent from a year ago to 141 million euros (124.61 million pounds) but missed analysts’ average estimate of 152 million euros.

Reporting by Jussi Rosendahl and Anne Kauranen; Editing by David Goodman

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