Finland’s Wartsila said it would move its loss-making two-stroke ship engine business to a new joint venture controlled by partner China State Shipbuilding Corporation (CSSC), adding the deal would boost its profitability this year.
Wartsila will sell the two-stroke business, which provides engines for large container ships, for 46 million euros ($62 million) to the joint venture - of which it will hold 30 percent.
“The partnership will enhance the position of Wartsila’s two-stroke technology in the marine engine market, and will provide a strong base for future investments in leading two-stroke technology and customer support,” it said in a statement.
As a result of the deal, Wartsila lifted its full-year operating profit margin forecast to about 11.5 percent, from around 11 percent. It also specified its 2014 sales growth guidance at around 5 percent, from a previous 0-10 percent.
“Wartsila’s position in two-stroke has been weak, with a market share of around 10 percent. Technology development is very expensive, so a partnership is a logical move and the deal with a large player like CSSC looks reasonable,” said Inderes analyst Juha Kinnunen.
Wartsila said that its underlying operating profit in the second quarter rose 10 percent from a year earlier to 122 million euros, above analysts’ average forecast of 119 million. (Reuters)