Italian shipbuilding group Fincantieri continues to recover from the effects of the pandemic reporting record-high production volumes while the production increases and associated costs in part due to the war in Ukraine drove the company to a financial loss in the first half of 2022. Management however expressed confidence that they will be able to lower their ballooning debt while also re-focusing on core businesses to drive future growth.
“Second quarter results are negatively affected by the impacts of a strategic review of the non-core business portfolio, by the surge in raw materials prices caused by the Russian-Ukrainian conflict, and by other non-recurring items,” said Pierroberto Folgiero, the newly appointed chief executive and managing director for the group. He assumed his role on June 30 replacing long-term chief executive Giuseppe Bono.
Folgiero assumed the leadership as the shipyard group continues to be in a period of transition. Recent deliveries included two new cruise ships, Discovery Princess and Viking Mars, and a multipurpose offshore patrol boat for the Italian Navy, as well as the first patrol boat and second corvette for the Qatari Ministry of Defense. A total of eight ships from five shipyards were delivered in the first half of 2022, contributing to a 16 percent increase in net revenues to more than $3.5 billion.
The company, however, also reported declines in EBITDA, adjusted, and net income with a net loss of $237 million, driven in part by the record production and increasing costs. It also contributed to a more than $1.1 billion increase in the group’s debt since the end of 2021, reaching a total debt of more than $3.3 billion. Debt, they, however, forecasted as peaking and expected to improve at least slightly by year’s end.
“In the upcoming months, we will be fully committed in the core business, benefitting from the expected growth in defense and the resumption of the cruise market,” said Folgiero. Furthermore, we will pursue with great dedication those industrial projects fostering operational excellence both in Italy and abroad, while investing in our human capital.”
He predicted that the company’s results would improve in part as they deliver five additional cruise ships in the second half of 2022. He pointed to the increased production for those ships as well as the rescheduling of payments from the cruise company provided during the pandemic as impacting the short-term performance of the company. He also highlighted a rescheduled delivery from July to December and the associated financial costs.
All of the shipyard group’s segments are however reportedly showing positive trends. The group’s committed backlog stands at 93 vessels with deliveries scheduled to 2029 with a value of more than $24 billion. In addition, they have pending commitments for 20 additional vessels, including the first commitments in years for new cruise ships, with the potential for more than $10.5 billion in additional revenues. Other new orders included a third vessel for the U.S. Navy to be built by Fincantieri Marinette Marine in Wisconsin as well as two offshore vessels to be built by VARD in Norway.
The conflict in Ukraine was highlighted as a key driver of costs as it affected the steel supply chain and caused increased energy and natural gas costs. It also negatively influenced transportation and insurance costs for the group which builds sections in Romania and transferred them through the Black Sea to Italy where the yards complete ship assembly.
With the cruise industry continuing its comeback, management expressed confidence that with their focus on their core businesses the financial performance will improve. With the continuing delivery of cruise ships, they however are now the smallest segment of the orderbook, with 27 ships, versus 34 in naval orders and 32 for offshore and specialized vessels.
Source: https://www.maritime-executive.com/article/fincantieri-reports-financial-loss-as-production-reaches-new-record
