Fincantieri reports strong growth for 2019 but VARD under review
Italian shipbuilder Fincantieri has reported a strong performance in its Q3 2019 report with a 9.7% growth in revenues in Jan-Oct and total backlog above €32bn with ships to be delivered up to 2027. However, VARD results were disappointing and a restructuring will see two Norwegian yards leaving the group and activities in Brazil put on hold.
Key highlights were:
- Order intake at €6.8bn: contracts signed for 17 units, including 11 cruise ships for five different brands (Oceania, Regent Seven Seas Cruises, Viking, MSC, Princess), and the order by the US Navy for an additional Littoral Combat Ship (LCS) unit.
- Total backlog at €32.3bn, comprising 106 ships, equivalent to approximately 5.9 times the 2018 revenues with 96 units to be delivered up to 2027.
- Delivery of 18 ships from 11 different shipyards, including two cruise ships, three expedition cruise vessels and three naval units, and launch of two vessels of the Italian Navy fleet renewal programme.
- Offshore and Specialized Vessels revenues at September 30, 2019 stood at €392mn, decreasing in comparison to the same period of 2018 because of the slowdown of production volumes due to the almost total lack of orders in the core market.
With reference to subsidiary VARD, following the delisting completed in December 2018, the process of full integration within the Fincantieri Group and alignment to the best practices continued.
A change in management followed, together with the launch of a reorganisation process. In particular, a review of the industrial management systems and of the economic planning of both Cruise and Offshore and Specialised Vessels projects was launched.
Such initiatives, supported by the Italian personnel of the Group, led on the one hand to the recovery of the production delays, which would have impeded the on-time delivery of the units, and to the review, on the other hand, of the estimated costs at completion which were included within the results as of September, 30 2019, including the higher costs occurred to recover the delays on the ships in delivery. Further analysis on the industrial management systems and on the economic planning of projects are still ongoing.
With regards to the initiatives already completed, the exit from the business of small fishery and aquaculture support vessels (which impacted negatively the EBITDA of the first nine months of 2019 by €19mn) and the dismissal of Aukra shipyard were approved. Also with reference to the review of the production footprint, the dismissal of Brevik, a second Norwegian shipyard was authorised. Moreover, the conversion of the Romanian Tulcea shipyard, which is now working at full capacity on Cruise shipbuilding is in its final stages of completion. The activity and the personnel of the Brazilian shipyard of Promar were reduced to the minimum in order to contain its management costs. The reorganisation plan for Vard is expected to be presented together with the approval of the full year Group results.