250 billion orders! Cruise ship building giant says goodbye to glory
2020-04-13 09:00
Thanks to the growth of its cruise ship business, Fincantieri, Europe's largest shipbuilding group, exceeded €5.8 billion in revenue last year, setting a new record high. The total order backlog reached a record 109 ships valued at 250 billion RMB. However, with the global pandemic of the novel coronavirus, and the cruise ship market being the hardest hit sector, 2020 is destined to be a watershed year for the cruise ship market, and 2019 may become a glorious memory for Fincantieri.
Total order backlog: 109 ships valued at €32.7 billion, a year-on-year increase of 12%.
Italian Fincantieri Group recently announced its 2019 performance. In 2019, Fincantieri's overall revenue reached a record €5.849 billion, an 8% increase compared to 2018. However, due to the negative performance and restructuring of its Norwegian subsidiary VARD, Fincantieri Group incurred a loss of €148 million last year, compared to a profit of €69 million in 2018.
Overall, Fincantieri's shipbuilding revenue last year reached US$5.088 billion, an 8.8% increase compared to 2018. Among them, cruise ship business revenue increased by 10.8% last year, from €3.226 billion to €3.574 billion. This is due to increased production and the increase in the size and value of cruise ships under construction at Fincantieri's Italian shipyards. In addition, VARD's cruise ship production also increased by 7% compared to 2018. Last year, cruise ship business revenue accounted for 56% of Ficantieri's total revenue, an increase of 2 percentage points compared to 54% in 2018.
Meanwhile, revenue from naval shipbuilding increased by 4.8% last year, from €1.434 billion to €1.503 billion, accounting for 23% of total revenue, compared to 24% in 2018.
In 2019, Fincantieri's total order intake reached 28 ships and €8.692 billion, basically remaining flat compared to 2018. Among them, shipbuilding accounted for 93% (82% in 2018), offshore and special vessels accounted for 2% (11% in 2018), and equipment, systems and services accounted for 10% (12% in 2018).
In the cruise ship market, Fincantieri achieved significant commercial results, receiving a total of 13 cruise ship orders last year from six different cruise brands—Oceania Cruises, Regent Seven Seas Cruises, Viking Cruises, MSC Cruises, Princess Cruises, and Ponant—with a total value exceeding €6 billion.
As of December 31, 2019, Fincantieri's total order backlog was 109 ships and €32.7 billion (approximately RMB 250 billion), a year-on-year increase of 12%. This includes €28.6 billion in confirmed orders (98 ships to be delivered before 2027) and €4.1 billion in optional orders. Currently, compared to 2019 revenue, Fincantieri's order backlog and total order backlog can guarantee approximately 4.9 years and 5.6 years of workload, respectively.
The vast majority of Fincantieri's total order backlog comes from the shipbuilding sector, accounting for 94% (93% in 2018). The offshore and special vessels sector accounts for 3% (4% in 2018). The equipment, systems and services sector accounts for 6%, remaining flat compared to 2018.
Last year, Fincantieri's 12 shipyards delivered a total of 26 new ships, including 4 cruise ships, 4 expedition cruise ships, 3 naval ships, and 15 offshore and special vessels.
The epidemic is expected to affect this year's performance and production activities have been suspended. 
However, the development of the novel coronavirus epidemic has clearly disrupted the company's plans, especially in the cruise ship sector, which has been hardest hit by the epidemic.
Looking ahead to 2020, Fincantieri stated that due to the novel coronavirus epidemic, Fincantieri has suspended production activities since March 16. Globally, one of the industries hardest hit by the epidemic is the tourism industry, especially the cruise ship market. Cruise companies were among the first to be forced to cease all operations. In this situation, Fincantieri's focus is on "protecting customers and strategic partners to maintain the integrity of the group's order backlog."
In addition, Fincantieri also mentioned that the current public health emergency is a force majeure event, included in the terms of Fincantieri's construction contracts. Relevant clauses allow Fincantieri to reschedule production plans and delivery dates.
Fincantieri believes that if the epidemic stops within a reasonable timeframe, its property rights and economic structure will be able to successfully cope with the impact of the emergency. Considering the impact of the epidemic on public safety and the uncertainties caused by the Italian production, social and economic situation, Fincantieri will disclose a new "2020-2024 Business Plan" to the market.
Meanwhile, under the impact of the epidemic, the EU antitrust regulator has temporarily suspended its review of the merger between Fincantieri and Chantiers de l’Atlantique.
For both the cruise ship market and the Fincantieri Group, 2020 is undoubtedly a watershed year. Securing new orders has clearly become a luxury; maintaining normal operations and deliveries are the most pressing realities facing the company.
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