Notice to convene the Annual General Meeting of Wärtsilä Corporation

Wärtsilä’s Board proposes a total dividend of EUR 1.06 per share for FY2025 (base EUR 0.54 + extraordinary EUR 0.52), to be paid in two instalments: EUR 0.79 on 23 March 2026 (record date 16 March 2026) and EUR 0.27 on 23 September 2026 (record date 16 September 2026). The Board seeks AGM authorisations to repurchase up to 57,000,000 shares (9.63% of shares) and to issue up to 57,000,000 shares (including up to 10,000,000 shares, 1.69%, for incentive schemes); total shares outstanding are 591,723,390 with 3,286,430 treasury shares. Governance changes include a proposed eight-member Board with Heather Rivard as a new member and Tom Johnstone as Chair, increases to board fees (e.g., Chair EUR 212,000) with ~40% of annual pay to be settled in shares, and PricewaterhouseCoopers Oy recommended as auditor and sustainability auditor.

Analysis

Market Structure: Wärtsilä’s EUR 1.06/share return (≈€624m total cash; ~€465m first instalment on 23 Mar and ≈€159m in Sep) plus authorisation to repurchase up to 57m shares (9.63%) is immediately pro-shareholder and will increase near-term EPS if executed. Winners: existing equity holders, short-term income investors, and active buyback arbitrageurs; losers: creditors/ratings if balance sheet flexibility is reduced and holders sensitive to dividend withholding/tax. The dual authorisations (repurchase + directed issuance) signal management wants dry powder for M&A while providing optionality to return capital.

Risk Assessment: Tail risks include a) a dilutive directed share issuance to fund an acquisition at >5% of market cap, b) earnings shortfall that makes the >50% payout policy unsustainable, or c) a credit-rating action if net cash falls by >€300–500m. Immediate (days): ex-dividend mechanical price drop and elevated option IV; short-term (weeks–months): market reaction to AGM votes and any buyback/issuance decisions; long-term (quarters): realised EPS lift or dilution depending on buyback vs. issuance. Hidden dependency: nominee-register concentration and tax residency differences will create uneven sell pressure across markets after ex-date.

Trade Implications: Best risk-reward is to buy the post-ex-dividend reset rather than pre-dividend capture (tax and price-drop risks). Use capital-return optionality: establish a tactical 2–3% long in WRT1V.HE after Mar 23 with target +15–25% over 12 months if buyback execution begins within 6 months; hedge with a 3-month put spread. If management announces a directed issuance >2% at <market price, cut exposure by 50% immediately. Watch AGM for committee composition/board alignment as a 30–90 day catalyst.

Contrarian Angles: Consensus will see this as purely shareholder-friendly, but it understates dilution risk from directed issues and the real cash drain (≈€624m) that could crowd out capex/M&A. Historical Nordic peers that combined large one-offs with open issuance (example parallels: mid‑2010s industrial consolidations) delivered mixed outcomes—share price outperformance only where buybacks were executed promptly. The market may underprice the optionality that a ~9.6% buyback authorisation creates; conversely it may overpay if issuance follows quickly.

Key Decisions for Investors

• Establish a 2–3% long position in Wärtsilä (WRT1V.HE) on or after the ex-dividend payment date (post 23 Mar 2026) to buy the anticipated dip; set a 12‑month target +15–25% and an immediate stop-loss at -10% of entry.
• Implement a protective options hedge: buy a 3‑month ATM put and sell a 3‑month 10% OTM put (put‑spread) sized to cover 50% of the equity position to limit downside during the AGM/buyback window (expiry ~late‑Jun 2026).
• Aggressively reduce exposure (sell 50% of position) if management announces a directed share issuance >2% of outstanding shares at a price >5% below prevailing market within 90 days, or if company discloses net cash depletion >€300m versus prior quarter.
• Short into dividend arbitrage: enter a small tactical short (0.5–1% portfolio) in WRT1V.HE 3–7 trading days before ex-dividend and cover on ex-date, paired long with a Nordic industrial peer (e.g., KOG.OL) to neutralise sector beta — size equal dollar amounts; profit targets 1–4% intraday, stop 2% adverse move.