Leading cruiseship builder Fincantieri has practically doubled its debt so far this year in order to preserve its backlog of cruiseship orders.
The Italian shipbuilder has seen its net debt increase to €1.42bn ($1.71bn) at the end of the third quarter, after deliveries were postponed and payment instalments delayed. At the end of last year, the company had net debt of €736m.
That helped the yard hold onto a strong portfolio of cruiseship orders.
Fabio Gallia, general manager of Trieste-based Fincantieri, told a recent earnings call that the shipbuilder is on a gradual path to recovery and that he expects that the cruise industry to recover as the Covid-19 vaccine is distributed.
"We are expecting 2021 as a kind of transitional year and going back to a 'new normal' in 2022," he said.
Peaked
Debt has peaked and is not expected to climb any higher as normal operations start to resume at Fincantieri's shipyards, said chief financial officer Giuseppe Dado.
The shipyard has a portfolio of 88 vessels to be delivered up to 2027. They are mostly cruiseships, naval ships, and specialised vessels for the offshore and fishing industry.
Deliveries will resume with the 135,500-gt Costa Firenze, which Fincantieri's Marghera shipyard in Italy is slated to hand over to giant Carnival Corp before the end of the year.
The vessel is part of a backlog of orders worth €36.8bn, which is up from €32bn a year ago, Dado said.
Preserving that backlog "at this point in time is key in our strategy", he added.
That goal has been helped by €1.15bn of credit lines granted from a pool of banks and guaranteed by Sace, the Italian export credit agency.
That is among the measures that had enable Fincantieri to reschedule deliveries and offer better payment terms to its customers, Dado said.
Sace has also provided the insurance coverage on loans which helped Fincantieri maintain its backlog of orders.
Chinese deal
Cruiseships represent around 50% of the Fincantieri's orderbook.
The yard group is diversifying into new areas such as the offshore wind sector which it hopes will take the place of the oil and gas sector.
The company is also stepping up its dealings with Chinese shipyards through Marine Interiors, a joint venture between Fincantieri China and CSSC Cruise Technology Development.
Marine Interiors has secured a contract understood to be worth around $50m to supply Shanghai Waigaoqiao Shipbuilding (SWS) with 2,800 cabins for a cruiseship under construction at the Chinese yard.
Fincantieri is developing a new air sanitation system together with International Center for Genetic Engineering and Biotechnology (ICGEB) virology laboratory.
The Safe Air system will be installed on 5,362-berth MSC Seashore which will be delivered in 2021.
That will help the shipbuilder deal with the hit that the pandemic deal to its earnings.
Covid-19 hit
The Italian shipbuilder saw revenues drop by 16% to €3.5bn for the first nine months of the year. That is down from €4.2bn in the same period last year.
The drop was due to lower production due to the impact of Covid-19.
