INTERIM REPORT JANUARY - MARCH 2008

Wärtsilä Corporation QUARTERLY REPORT 25 April 2008 at 8.30 local time   STRONG DEMAND CONTINUED - PROFITABILITY DEVELOPING ACCORDING TO PLAN   FIRST-QUARTER HIGHLIGHTS   - Market activity continued high in both Ship Power and Power Plants - Good growth continues, order intake grew 67% to EUR 1,936 million (1,157) - Net sales grew 12% to EUR 850 million (761) - Operating income (EBIT) grew 28% to EUR 81 million, or 9.6% of net sales (EUR 63 million and 8.3%) - Strong cash flow from operating activities EUR 75 million (79) - Earnings per share amounted to 0.49 (0.44)   OLE JOHANSSON, PRESIDENT AND CEO: "Demand continued strong in all businesses and new orders grew by 67%. Our order book reached a new milestone, exceeding EUR 7,000 million. Net sales grew by 12% and our profitability, in terms of EBIT margin, was 9.6% and in line with our expectations. We expect ordering activity to continue to be solid during the next quarter in all our businesses. In Ship Power, some slower growth will be seen during the third quarter. However, we expect activity in the Power Plant market to continue to be very strong with no signs of a slowdown. Our balanced business mix and global reach offset the current market turbulence, and our environmentally compatible portfolio gives us a competitive edge for the future. Based on the strong order book and capacity investments, we will continue our positive development and 2008 will be a year of strong growth and further improved profitability".   WÄRTSILÄ'S PROSPECTS FOR 2008 REITERATED Based on the strong order book, Wärtsilä's net sales are expected to grow by about 25% in 2008. Wärtsilä's profitability varies considerably from one quarter to another. The full-year operating margin will exceed 11%.   ANALYST AND PRESS CONFERENCE An analyst and press conference will be held on Friday 25 April 2008 starting at 10.45 a.m. Finnish time (8.45 a.m. UK time) at the Wärtsilä headquarters in Helsinki, Finland. The conference will be webcasted and can be viewed at the following address: http://194.100.179.139:80/wip//directlink.do?newbrowser=1&pid=2211826. An on-demand version of the webcast will be available on the company website later the same day.   Note that the international teleconference will be held separately the same day at 14.00 hrs Finnish time (12 p.m. UK time). To listen to the teleconference, please call: +44 (0)20 7162 0025 if you are calling from the UK and +1 334 323 6201 if you are calling from the US and enter the PIN-code 793206. If you want to ask questions during the teleconference, press the number 1 on your phone to register for a question and the hash or pound key to withdraw a question. The event title for the call is: Wärtsilä Result Q1 2008, please be ready to state your details and the name of the conference to the operator.   Wärtsilä Corporation     Raimo Lind                                                                   Atte Palomäki Executive Vice President                                               Group Vice president, Communications   Wärtsilä in brief Wärtsilä enhances the business of its customers by providing them with complete lifecycle power solutions. When creating better and environmentally compatible technologies, Wärtsilä focuses on the marine and energy markets with products and solutions as well as services. Through innovative products and services, Wärtsilä sets out to be the most valued business partner of all its customers. This is achieved by the dedication of 17,000 professionals manning 160 Wärtsilä locations in close to 70 countries around the world.           INTERIM REPORT JANUARY-MARCH 2008     The figures in this interim report are unaudited.     REVIEW PERIOD JANUARY - MARCH 2008 IN BRIEF   MEUR 1-3/2008 1-3/2007 Change 2007 Order intake 1 936 1 157 67% 5 633 Order book 31 March 7 219 4 860 49% 6 308 Net sales 850 761 12% 3 763 Operating result 81 63 28% 379 % of net sales 9.6% 8.3%   10.1% Profit before taxes 74 60   372  Earnings/share, EUR 0.49 0.44   2.74 Cash flow from         operating activities 75 79   431 Interest-bearing net debt         at the end of the period -79 179   -27 Gross capital expenditure 38 42   231     MARKET DEVELOPMENT   SHIP POWER In terms of new vessel orders, the start of 2008 has been clearly below the exceptionally high ordering of recent years. Monthly orders began to decline already at the end of last year, and ordering activity during the first three months, relating to the number of vessels, was at the same level as in 2003. This indicates a drop of as much as 50% from the very high activity in 2007. The decline was most visible in various merchant segment vessels. New orders for bulk carriers remained good, but volumes have normalized from their peak levels. In the offshore segment, the trend from smaller vessels to bigger and more complex tonnage continued. Despite the recent dip, freight rates are still at a high level, and new build prices have not come down, which indicates that ship yards still believe in continuing demand. To summarize the situation, there still seems to be overall market demand, but various uncertainty factors have postponed decision-making.   Korea has clearly regained the leading position in new vessel ordering with 41% of the market, in terms of number of new vessels ordered in the first quarter. China is a clear number two with 33% but has suffered somewhat from the current uncertain market conditions. During the review period, Europe received 11%, Japan 5%, and other countries 10% of new orders.   Ship Power market shares Wärtsilä's market share for medium speed main engines continued a slight downward trend to 36% (38 at the end of the previous quarter). This is explained by Wärtsilä's capacity constraints and the deferred ordering of LNG vessels. Wärtsilä's market share for low speed engines declined to 13% (16). In low speed engines, Wärtsilä's demand has shifted from bigger engines to medium size bore, implying less power and a smaller share of the total market. The market share for auxiliary engines remained almost unchanged at 6% (5).   POWER PLANTS Markets continued to be globally active during the review period. The main growth drivers in the power plant market remain world economic growth, as well as the need to increase efficiency and versatility in power generation due to high fuel prices. Other drivers for the power plant market demand are environmental concerns and fuel availability issues. The market situation remained good and demand in the Power plant market remained high in all segments relevant to Wärtsilä - flexible baseload production, industrial self generation, grid stability and peaking, as well as power solutions for the oil and gas industry.   Power Plants market shares According to the statistics compiled by Diesel and Gas Turbine magazine the total global market for oil and gas power plants in Wärtsilä's power range was 14,060 MW (14,750) between June 2006 and May 2007. Wärtsilä's market share of heavy fuel oil plants was 38% (34). In the market for light fuel oil, Wärtsilä's market share increased slightly to 24% (23), mainly as a result of high demand for Wärtsilä's power plants fuelled by liquid bio-fuels. The market for gas power plants, including both reciprocating engines and gas turbines, was roughly 10,900 MW (10,400), Wärtsilä's share in this segment was 12% (8).   ORDER INTAKE AND ORDER BOOK The order intake for the review period totalled EUR 1,936 million (1,157), representing growth of 67%. Wärtsilä Ship Power continued to enjoy extremely lively ordering and its order intake for the review period totalled EUR 758 million (521), a growth of 45%. Merchant vessel orders were clearly dominant with 52% of total Ship Power orders. Most of the orders were for bulk carriers, and it seems that marine equipment orders are still profiting from the bulk carrier boom of last year. The remaining orders within the Merchant vessel segment, were distributed quite equally between tankers, RoRo vessels and cargo vessels, while containerships had a somewhat smaller share. The Offshore segment accounted for 21% of Wärtsilä Ship Power's new orders during the review period. The orders were still highly supply and support vessel driven, but orders were also received for offshore drilling appliances. The Cruise & ferry and special vessel segments each had 13% share of the orders, the rest being for Naval vessels.   Order intake for the Power Plants business was very strong during the first quarter, and 168% higher than during the corresponding period last year, totalling EUR 566 million (211). The largest oil-fired power plant orders were received from Brazil, Indonesia and Greece. The two Brazilian projects, disclosed in March, are the first power plants to materialize from the A-3 energy auction conducted in Brazil in 2007. Wärtsilä sees further potential in the Brazilian market. The largest gas power plants orders were received from the USA and Algeria. The power plant order from South Texas Electric Cooperative marks an entry into the Texas utility market and further improves Wärtsilä's foothold in the US grid stability market.   The Services business received several substantial project orders during the review period. These include a contract from Norwegian ferry operator New Kystlink AS for an overhaul project of the "Pride of Telemark" ferry, a major retrofit order from Laurin Maritime for Wärtsilä Senitec oily water separators, and the gas conversion and relocation of the EGESUR power plant in Peru. These orders confirm the success of Wärtsilä's Services business and the suitability of its offering to the needs of the market.   At the end of the review period the Ship Power order book stood at EUR 4,810 million (3,285), a growth of 46%. The Power Plants order book stood at EUR 1,822 million (1,140), which is 60% higher than the corresponding period in 2007. In 2004, Wärtsilä received two orders for power plant deliveries to Iraq. The first power plant of the Iraqi order has almost been completed, and all corresponding payments have been received. The second order has been excluded from the order book during the review period due to the uncertainty of delivery. At the end of the review period Wärtsilä's total order book stood at EUR 7,219 million (4,860), a growth of 49%.     Order intake by business         MEUR 1-3/2008 1-3/2007 Change 2007 Ship Power 758 521 45% 2 600 Services 611 423 44% 1 607 Power Plants 566 211 168% 1 421 Order intake, total 1 936 1 157 67% 5 633   Order intake Power Plants         MW 1-3/2008 1-3/2007 Change 2007 Oil 442 130 239% 1 358 Gas   543 122 344% 1 005 Renewable fuels 37 204 -82% 483   Order book by business         MEUR 31 Mar. 2008 31 Mar. 2007 Change 2007 Ship Power 4 810 3 285 46% 4 292 Services 588 433 36% 405 Power Plants 1 822 1 140 60% 1 608 Order book, total 7 219 4 860 49% 6 308   NET SALES Wärtsilä's net sales for January-March 2008 totalled EUR 850 million (761), a growth of 12%. Ship Power net sales fell by 5% due to the timing of deliveries and totalled EUR 244 million (256). Net Sales for Power Plants developed favourably during the review period and totalled EUR 175 million (150), a growth of 17% compared to the corresponding period last year. Net sales from the Services business increased to EUR 428 million (352), a growth of 22%. Organic growth represented 20% of Services' net sales growth. Ship Power net sales accounted for 29%, Services net sales for 50%, and Power Plants for 21% of total net sales.   Net sales by business         MEUR 1-3/2008 1-3/2007 Change 2007 Ship Power 244 256 -5% 1 320 Services 428 352 22% 1 550 Power Plants 175 150 17% 882 Net sales, total 850 761 12% 3 763   FINANCIAL RESULTS The operating result rose to EUR 81 million (63) for January-March 2008, which is 9.6% of net sales (8.3). Financial items amounted to EUR -7 million (-4). Net interest totalled EUR 0 million (-2). Profit before taxes amounted to EUR 74 million (60). Taxes in the reporting period amounted to EUR -25 million (-17). Earnings per share were EUR 0.49 (0.44).   BALANCE SHEET, FINANCING AND CASH FLOW Cash flow from operating activities for January-March 2008 was strong and totalled EUR 75 million (79). Advance payments at the end of the period totalled EUR 1,083 million (698). Liquid reserves at the end of the period amounted to EUR 432 million (148). Net interest-bearing loan capital totalled EUR -79 million (179). The solvency ratio was 32.0% (42.4) and gearing was -0.07 (0.19). Dividends based on the decision taken by the AGM 2008, paid on 2 April 2008, affect the solvency ratio.   HOLDINGS Wärtsilä owns 7,270,350 B shares in Assa Abloy, or 2.0% of the total. This holding has been booked in the balance sheet at its market value at the end of the reporting period, EUR 83 million.   CAPITAL EXPENDITURE Gross capital expenditure in the review period totalled EUR 38 million (42), which comprised EUR 5 million (12) in acquisitions and investments in securities and EUR 33 million (30) in production and information technology investments. Depreciation amounted to EUR 21 million (18).   Due to strong volume growth, the total capital expenditure for 2008 is expected to be approx. EUR 200 million.   STRATEGIC ACQUISITIONS, JOINT-VENTURES AND EXPANSION OF NETWORK In March Wärtsilä acquired the Norwegian company Maritime Service AS, which specializes in ship service, mechanical and reconditioning services. Maritime Service has its operations in Ålesund, on the west coast of Norway. The annual net sales of Maritime Service were 26 million NOK (EUR 3.2 million) in 2007.   During the review period Wärtsilä Services continued the expansion of its network by opening offices and workshops in Namibia, Chile and Brazil.   OTHER STRATEGIC ISSUES The importance of Asia as a shipbuilding hub has notably increased during recent years. In order to be closer to the fastest growing shipbuilding markets, the senior management of Wärtsilä Ship Power will relocate to Shanghai, China during 2008.   MANUFACTURING During the review period, new investments to increase the capacity of the Automation business in Norway and the Propulsion business in Spain were initiated. This capacity will become available in 2009. All other ongoing investment programs to increase capacity, including joint ventures, are proceeding according to plan. Continuous progress has been made in enlarging the supplier base in emerging markets.   In March, Wärtsilä and Jiangsu Rongsheng Heavy Industries Group Co Ltd (RSHI) signed a licence agreement for the manufacture and sale of Wärtsilä low speed marine diesel engines by RSHI in China. Another license agreement was signed in April between Wärtsilä and Zhenjiang CME Co Ltd (CME) for the manufacture and sale of Wärtsilä RT-flex low speed marine diesel engines by CME in China.   RESEARCH & DEVELOPMENT During the review period several R&D accomplishments were achieved. The 20kW solid oxide fuel power plant prototype that was started in Wärtsilä's Fuel Cell test centre in October, passed the 1,000 hours milestone. The first RTA 82 engine was successfully started and passed the factory acceptance test witnessed by the customer and classification society. The engine is an addition to Wärtsilä's low speed engine portfolio and has been developed in collaboration with Hyundai Heavy Industry.   PERSONNEL Wärtsilä had 16,979 (14,754) employees at the end of March. The largest personnel increases took place in the Services business where the personnel increase was 15% compared to the corresponding period 2007. 10,095 (8,746) people were employed by the Services business.   During the review period Wärtsilä launched a Top Graduates professional programme for R&D. During the programme, attendees will drive R&D projects throughout Wärtsilä's international organization. A similar program for finance graduates has been in action since March 2007.   CHANGES IN MANAGEMENT Atte Palomäki (42) M.Sc. (pol.) started as Group Vice President, Corporate Communications and member of the Wärtsilä Board of Management on 1 of March 2008.   SHARES AND SHAREHOLDERS In March Wärtsilä's A and B-series shares were combined. After the combination all shares carry one vote and equal rights. The combination of the share series involved a free share issue directed to the holders of Series A-shares so that holders of Series A-shares received one share free of charge for each nine Series A-shares. In the directed share issue 2,619,954 shares were given. Trading with the new and combined shares started on 27 of March.   SHARES ON HELSINKI EXCHANGES 26 March 2008 Number of Number of       shares votes     A-share (WRTAV) 23 579 587 235 795 870     B-share (WRTBV) 72 389 974 72 389 974               31 March 2008 Number of Number of Number of shares traded   shares votes 1-3/2008 WRT1V 98 589 515 98 589 515 47 876 412           1 Jan. -26 March 2008 High Low Average 1) Close A-shares 53.00 33.05 46.51 42.79           1 Jan. -31 March 2008 High Low Average 1) Close   52.40 35.02 43.71 42.75 1) Trade-weighted average price.                     31 Mar. 31 Mar. 2007   2008 Market capitalization, EUR   4 215 4 417   million Foreign shareholders    49.6% 30.5%       CHANGES IN OWNERSHIP In relation to the combination of the share series and the directed free share issue, Wärtsilä was informed of the following changes in ownership:   The Fiskars Group's share of Wärtsilä Corporation's votes decreased to less than 1/5 (20%). Following the transaction Fiskars Corporation holds 901,857 or 0.9% of Wärtsilä's share capital and votes, and the Fiskars wholly owned subsidiary Avlis AB's holds 15,944,444 or 16.2% of Wärtsilä's share capital and total votes. In total, Fiskars Group holds 16,846,301 or 17.1% of Wärtsilä Corporation's share capital and votes.   Varma Mutual Pension Insurance's share of Wärtsilä Corporation's shares increased to more than 1/20 (5%) and the share of the votes decreased to less than 1/10 (10%). Following the transaction Varma holds 5,130,087 or 5.2% of Wärtsilä's share capital and total votes.   Svenska Litteratursällskapet i Finland r.f's share of Wärtsilä Corporation's votes decreased to less than 1/20 (5%). Following the transaction Svenska Litteratursällskapet holds 1,735,506 or 1.76% of Wärtsilä's share capital and total votes.   The above-mentioned changes came into effect when the combined and new shares were registered in the trade register on 26 March 2008.   OPTION SCHEMES During the review period Wärtsilä had one option scheme. This 2002 option scheme ended on 31 March 2008 and all option rights were exercised.   DECISIONS TAKEN BY THE ANNUAL GENERAL MEETING Wärtsilä's Annual General Meeting on 19 March approved the financial statements and discharged the company's President & CEO and the members of the Board of Directors from liability for the financial year 2007. The Meeting approved the Board of Directors' proposal to pay a dividend of EUR 2.25 per share and an extra dividend of EUR 2.00 per share for a total dividend of EUR 4.25 per share.   The Annual General Meeting decided that the Board of Directors shall have six members. The following were elected to the Board: Ms Maarit Aarni-Sirviö, Mr Kaj-Gustaf Bergh, Mr Kari Kauniskangas, Mr Antti Lagerroos, Mr Bertel Langenskiöld and Mr Matti Vuoria.   The firm of authorized public accountants KPMG Oy Ab were appointed as the company's auditors.   The Annual General Meeting approved the proposal of the Board of Directors to amend the Articles of Association.   The Annual General Meeting approved the proposal of the Board of Directors to direct a free share issue to holders of A shares and to combine the Series A and Series B shares and the changes to the Articles of Association.   ORGANIZATION OF THE BOARD OF DIRECTORS The Board of Directors of Wärtsilä Corporation elected Antti Lagerroos as its chairman and Matti Vuoria as the deputy chairman. The Board decided to establish an Audit Committee, a Nomination Committee and a Compensation Committee. The Board appointed from among its members the following members to the Committees:   Audit Committee: Antti Lagerroos, chairman Maarit Aarni-Sirviö Matti Vuoria   Nomination Committee: Antti Lagerroos, chairman Matti Vuoria Kaj-Gustaf Bergh   Compensation Committee: Antti Lagerroos, chairman Matti Vuoria Bertel Langenskiöld   RISKS AND BUSINESS UNCERTAINTIES No major changes in the risks and business uncertainties occurred during the review period. The biggest risks remain related to sub-suppliers capacity constraints. Sub-suppliers are running at capacity and global demand in key components such as castings, forgings and thruster gear-wheels exceeds supply. Wärtsilä's measures to secure availability of key components continue in close collaboration with the supply chain. The uncertainty within the financial markets, as well as the US housing market, has so far not had any impact on Wärtsilä.   MARKET OUTLOOK Record long order books and high ship prices, in combination with fluctuating charter rates and uncertainties in the financial markets, impacted the shipping and ship building industry and led to a decrease in new vessel orders. This has been long anticipated and could, in fact, be seen as healthy for the industry because it has reduced market speculation. At this stage it is too early to predict what direction the market will take following these developments.   Wärtsilä Ship Power's ordering activity has continued at the same high level as at the end of last year. Even though key components, such as main engines and propulsion equipment, remain critical factors for the entire vessel supply, there is a time lag between vessel ordering and component ordering. For this reason Wärtsilä foresees an active Ship Power market for at least the second quarter of 2008. During the third quarter, it is expected that a slowdown will be seen within the merchant segment ordering as a consequence of a reduction in vessel orders.   In the Power Plant market the situation remains good. The main drivers for continued growth, such as economic growth and the need to increase efficiency and versatility in power generation, remain. Other drivers for the power plant market demand are environmental concerns and fuel availability issues. Flexible baseload, as well as industrial self-generation applications, are forecasted to remain active market segments throughout the Middle East, Africa and the Americas. Continued growth potential is seen in the grid stability services market in North America as well as in other developed countries. Wärtsilä's power plant solutions are ideally suited for today's markets, which require high efficiency and operational flexibility plus environmental sustainability. For Wärtsilä Power Plants, continued high ordering activity is expected in all segments for at least the next two quarters.   Activity in the Services business will continue strong and it will continue to constitute a considerable share of Wärtsilä's net sales.   The long order book and flexible manufacturing model, in combination with the solid growth in Services, gives Wärtsilä ample time to react to potential fluctuations in the market.   WÄRTSILÄ'S PROSPECTS FOR 2008 REITERATED Based on the strong order book, Wärtsilä's net sales are expected to grow by about 25% in 2008. Wärtsilä's profitability varies considerably from one quarter to another. The full-year operating margin will exceed 11%.     WÄRTSILÄ INTERIM REPORT JANUARY - MARCH 2008 This interim financial report is prepared in accordance with IAS 34 (Interim Financial Reporting) using the same accounting policies and methods of computation as in the annual financial statements for 2007. All figures in the accounts have been rounded and consequently the sum of individual figures can deviate from the presented sum figure.   Use of estimates The preparation of the financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the valuation of the reported assets and liabilities and other information, such as contingent liabilities and the recognition of income and expenses in the income statement. Although the estimates are based on the management's best knowledge of current events and actions, actual results may differ from the estimates. Amended and new International Financial Reporting Standards (IFRS) as of 1 January 2008:   -        IFRIC 11 IFRS 2 - Group Treasury Share Transaction -        IFRIC 12 Service Concession Agreements -        IFRIC 13 Customer Loyalty Programmes -        IFRIC 14 IAS 19 - The Limit on Defined Benefit Asset, Minimum Funding Requirements and their Interaction   The adoption of the new and revised standards and interpretations does not have any material effect on the interim financial report.     This interim report is unaudited.           CONDENSED INCOME STATEMENT       MEUR  1-3/2008  1-3/2007 2007 Net sales 850 761 3 763 Other income 5 4 21 Expenses -754 -683 -3 328 Depreciation and impairment -21 -18 -78 Operating result 81 63 379 Financial income and expenses -7 -4 -8 Share of profit of associates     1 Profit before taxes 74 60 372 Income taxes -25 -17 -106 Profit for the financial period 49 42 265         Attributable to:       Equity holders of the parent company 47 42 262 Minority interest 2   3 Total 49 42 265         Earnings per share attributable to equity holders of the parent company:   Earnings per share, EUR 0.49 0.44 2.74 Diluted earnings per share, EUR 0.49 0.44 2.73                 CONDENSED BALANCE SHEET       MEUR 31 Dec. 31 Mar. 2008 31 Mar. 2007 2007 Non-current assets       Intangible assets 641 605 646 Property, plant and equipment 385 315 377 Equity in associates 15 11 16 Investments available for sale 138 192 155 Deferred tax receivables 68 82 70 Other receivables 18 43 19   1 266 1 248 1 283 Current assets       Equity in associates 1 6 1 Inventories 1 311 960 1 081 Other receivables 1 117 962 1 088 Cash and cash equivalents 432 148 296   2 861 2 076 2 466         Assets 4 127 3 324 3 749                 Shareholders' equity       Share capital 336 335 336 Other shareholders' equity 628 768 979 Total equity attributable to equity holders of the parent 964 1 103 1 315         Minority interest 11 11 10 Total shareholders' equity 975 1 115 1 325         Non-current liabilities       Interest-bearing debt 241 257 245 Deferred tax liabilities 80 77 81 Other liabilities* 559 437 466   881 771 792 Current liabilities       Interest-bearing debt 123 107 38 Other liabilities 2 148 1 332 1 594   2 271 1 439 1 632         Total liabilities 3 152 2 210 2 424         Shareholders' equity and liabilities 4 127 3 324 3 749         *In Q1/2007, the total amount of Advances received was presented in Current liabilities.         CONDENSED CASH FLOW STATEMENT       MEUR  1-3/2008  1-3/2007 2007 Cash flow from operating activities:       Profit before taxes 74 60 372 Depreciation and impairment 21 18 78 Financial income and expenses 7 4 8 Selling profit and loss of fixed assets and other adjustments -4 -1 -7 Share of profit of associates     -1 Changes in working capital 5 28 135 Cash flow from operating activities before financial items and taxes 103 108 585 Net financial items and income taxes -27 -29 -154 Cash flow from operating activities 75 79 431         Cash flow from investing activities:       Investments in shares and acquisitions -5 -12 -65 Net investments in tangible and intangible assets -31 -27 -166 Proceeds from sale of shares     7 Cash flow from other investing activities 1   9 Cash flow from investing activities -35 -38 -214         Cash flow from financing activities:       Issuance of share capital   3 4 New long-term loans   58 65 Amortization and other changes in long-term loans -9 -16 -33 Changes in short term loans and other financing activities 108 50 36 Dividends paid   -167 -168 Cash flow from financing activities 100 -72 -95         Change in liquid funds, increase (+) / decrease (-) 140 -31 122                 Cash and cash equivalents at beginning of period 296 179 179 Fair value adjustments, investments     1 Exchange rate changes -4 -1 -6 Cash and cash equivalents at end of period 432 148 296   STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY         MEUR Total equity attributable to equity holders Minority Total of the parent             interest equity         Fair           Share   value         Share issue Translation and Retained     other   capital premium differences reserves earnings     Shareholders' equity on 31 December 2007 336 61 3 127 788 10 1 325 Translation differences     -4     -1 -5 Available-for-sale investments                  gain / loss from fair valuation,                  net of taxes       -14     -14 Cash flow hedges after taxes       27     27 Net income recognized directly in equity     -4 14   -1 9 Profit for the financial period         47 2 49 Total recognized income an expense for the period     -4 14 47 1 58 Dividends         -408   -408 Shareholders' equity on 31 March 2008 336 61 -1 141 427 11 975                 Shareholders' equity on 31 December 2006 334 58 3 128 693 13 1 230 Other changes           -2 -2 Available-for-sale investments                  gain/loss from fair valuation,                  net of taxes       7     7 Cash flow hedges after taxes       1     1 Net income recognized directly in equity       8   -2 7 Profit for the financial period         42   42 Total recognized income and   expense for the period 8 42 -2 49 Options exercised 1 3         3 Dividends paid         -167   -167 Shareholders' equity on 31 March 2007 335 61 3 136 568 11 1 115   Geographical segments Europe Asia Americas Other Group MEUR           Net sales 1-3/2008 318 301 159 71 850 Net sales 1-3/2007 330 257 98 75 761   INTANGIBLE ASSETS AND PROPERTY, PLANT &     EQUIPMENT MEUR 1-3/2008 1-3/2007 2007 Intangible assets       Book value at 1 January 646 602 602 Changes in exchange rates -6 -2 -6 Acquisitions 2 3 47 Additions 7 6 33 Depreciation and impairment -8 -7 -30 Disposals and intra-balance sheet transfer   2   Book value at end of period 641 605 646         Property, plant and equipment       Book value at 1 January 377 315 315 Changes in exchange rates -1   3 Acquisitions 2   1 Additions 26 24 133 Companies sold   -10 -17 Depreciation and impairment -13 -10 -48 Disposals and intra-balance sheet transfer -6 -4 -9 Book value at end of period 385 315 377                 GROSS CAPITAL EXPENDITURE       MEUR 1-3/2008 1-3/2007 2007 Investments in securities and acquisitions 5 12 65 Intangible assets and property, plant & equipment 33 30 166 Group 38 42 231         During the review period investment in the enlargement of propulsion equipment manufacturing in the Netherlands and China amounted to EUR 2 million, and Wärtsilä had commitments related to the enlargements amounting to EUR 8 million at the end of the review period. In addition, Wärtsilä's part of the investments related to the investment programme in the Korean joint venture Wärtsilä Hyundai Engine Company Ltd. amounted to EUR 5 million and the part of the commitments related to the investment programme were EUR 7 million at the end of the review period.   IMPACT OF ACQUISITIONS ON THE CONSOLIDATED BALANCE SHEET During the period Wärtsilä has acquired a Norwegian company Maritime Service AS, specializing in ship service, mechanical and reconditioning services.     MEUR 1-3/2008 Acquisition costs 3 Acquired assets to fair value 1 Goodwill 2     Specification of acquired assets:   Intangible assets 1 Property, plant and equipment 2 Cash and cash equivalents 1 Liabilities -2 Total 1   INTEREST-BEARING LOAN CAPITAL       31 Dec. MEUR 31 Mar. 2008 31 Mar. 2007 2007 Long-term liabilities 241 257 245 Current liabilities 123 107 38 Loan receivables -12 -37 -14 Cash and bank balances -432 -148 -296 Net -79 179 -27         FINANCIAL RATIOS  1-3/2008  1-3/2007 2007 Earnings per share, EUR 0.49 0.44 2.74 Diluted earnings per share, EUR 0.49 0.44 2.73 Equity per share, EUR 9.78 11.53 13.70 Solvency ratio, % 32.0 42.4 45.9 Gearing -0.07 0.19 -0.01         PERSONNEL          1-3/2008  1-3/2007 2007 On average 16 813 14 583 15 337 At end of period 16 979 14 754 16 336         CONTINGENT LIABILITIES       31 Dec. MEUR 31 Mar. 2008 31 Mar. 2007 2007 Mortgages 13 15 13 Chattel mortgages 8 21 8 Total 21 37 22         Guarantees and contingent liabilities       on behalf of Group companies 441 359 479 Nominal amount of rents according to leasing contracts 71 42 69 Total 512 401 548                 NOMINAL VALUES OF DERIVATIVE INSTRUMENTS     MEUR Total amount of which closed   Interest rate swaps 140     Foreign exchange forward contracts 1 456 278   Currency options, purchased 151 20   Currency options, written 20 20     CONDENSED INCOME STATEMENT,         QUARTERLY MEUR 1-3/2008 10-12/2007 7-9/2007 4-6/2007 1-3/2007 Net sales 850 1 272 933 797 761 Other income 5 10 3 4 4 Expenses -754 -1 114 -821 -710 -683 Depreciation and -21 -22 -19 -18 -18 impairment Operating result 81 146 96 73 63 Financial income and -7 -1 -2 -1 -4 expenses Share of profit of   1       associates Profit before taxes 74 145 95 72 60 Income taxes -25 -43 -26 -20 -17 Profit for the 49 103 68 52 42 financial period             Attributable to:           Equity holders of 47 101 68 52 42 the parent company Minority interest 2 2 1 1   Total 49 103 68 52 42             Earnings per share attributable to equity       holders of the parent company: Earnings per share, 0.49 1.05 0.71 0.54 0.44 EUR Diluted earnings per 0.49 1.05 0.70 0.54 0.44 share, EUR   CALCULATION OF FINANCIAL RATIOS       Earnings per share (EPS)   Profit before taxes - income taxes - minority interests Adjusted number of shares over the financial year       Equity per share   Shareholders' equity   Adjusted number of shares at the end of the period     Solvency ratio   Shareholders' equity + minority interests x 100 Balance sheet total - advances received       Gearing   Interest-bearing liabilities - cash and bank balances Shareholders' equity + minority interests       24 April 2008 Wärtsilä Corporation Board of Directors

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