Fincantieri has Positive Outlook After First Half Impacted by COVID-19
The Fincantieri group, which operates 18 shipyards on four continents, announced financial results for the first half of 2020, which as expected were dramatically impacted by the coronavirus, but in contrast to many shipyards provided a positive business outlook. The shipbuilder said that operations were rebounding from the six-week shutdown in Italy and that while new orders were low, it had not recorded any order cancelations and its backlog continues to grow.
As of the mid-year, Fincantieri has a total backlog for 117 ships, of which 28 billion euros is committed orders and nearly another 10 billion is a soft backlog with production work currently scheduled to 2027. Despite the impact of the coronavirus, Fincantieri added 5 billion euros to its backlog in the first half of 2020, including a contract for the design and construction of a first-in-class new guided-missile frigate of the U.S. Navy. The contract, which includes an option for nine additional ships, is also the first time Fincantieri Marinette Marine will act as a prime contractor in a project for the U.S. Navy.
Fincantieri CEO Giuseppe Bono said, “Our current backlog allows us to look at the future with confidence, confirming a workload for the next six to seven years with consequent financial and economic performances in line with the previous business plan’s targets.” He also pointed to the success of the company’s diversification strategy as helping Fincantieri to manage through this period impacted by COVID-19. The businesses related to infrastructure, electronics, and cybersecurity contributed to revenue growth in the non-shipbuilding portion of the company’s business. They recorded orders related to the offshore renewable energy sector, fishery, and infrastructure.
Due to the shutdown and postponements in production, the group reported more than a 15 percent decline in total revenues during the first half of 2020, with more than a 13 percent decline from their cruise ship business and more than 27 percent decline in revenues from naval vessels. The total value of new orders received was similarly impacted declining by nearly 75 percent in the first half of 2020.
Fincantieri successfully delivered three cruise ships, the Seven Seas Splendor, Scarlet Lady, and Le Bellot, as well as one fishery vessel and the tenth vessel for the U.S. Navy in the LCS program in the first half of the year. Other divisions also delivered an offshore subsea construction vessel, a fishing vessel, two ferries, and an aqua vessel. Three cruise ship deliveries while rescheduled are still expected to happen in the second half of the year.
Work gradually resumed at the Italian facilities starting in late April and by the end of June, Fincantieri said its staffing was back to 90 percent in Italy. They forecast that production volumes at the group’s Italian operations are expected to be in line with those before the COVID-19 outbreak. Work is proceeding on projects for the Qatari Ministry of Defense and the Italian Navy with Fincantieri aiming to substantially recover the production activity slowdown caused by the suspension by the end of the year.
The company is optimistic about its cruise ship construction business, which accounts for more than half of the company’s shipbuilding revenues. While Fincantieri expects postponements of deliveries due to the production downtime, they have not received any order cancelations and pointed out that cruise lines aim to use the new, more efficient ships to rebuild operations. The noted that in addition to an extension with Norwegian Cruise Line they had also agreed to changes on the four cruise vessels in the order book. Separately, Holland America Line announced today that they were expecting a three-month delay in delivery of its new cruise ship, which it renamed Rotterdam. That ship under construction in Italy was scheduled for May 2021 and has been rescheduled for the end of July 2021.
Discussing the medium-long term scenarios, Fincantieri also presented a positive outlook. They pointed to the existing backlog as well as efforts to convert the soft backlog into firm orders and their continuing ability to win new contracts. Unlike many shipyards that have been highlighting staff reductions, Fincantieri reported only a small decline in employment coming mostly from a reduction of its workforce in Norway and closing two smaller operations in Romania. At mid-year, the group employed nearly 20,000 people worldwide with 9,500 in Italy.
Despite a challenging global and market environment, heavily affected by the spread of the COVID-19 pandemic, Fincantieri said it expects that the group will basically return to the growth levels and margins embedded in the current order book.