No second wind needed for new build sector

Conor Feasey
By Conor Feasey September 20, 2022 15:44

No second wind needed for new build sector

The superyacht industry looks buoyant. Despite rising inflation, sanctions, worries of an impending global recession and the looming prospect of the sales bubble bursting, yacht builders continue to report positive financial results – and there are no signs of it stopping any time soon. Private banks, shipyards and brokers all predict continued growth for the coming year.

Italian shipyard Sanlorenzo (pictured above), which just posted its results for the first half (H1) of 2022, is following the growth trend. Company sales of new yachts are up 30.8% from the same time last year, totalling €344.9m ($344.6m). Its superyacht division accounts for €77m of that, a 9.6% increase compared with the first half of last year. Sales have brought the total order book value to about €1.4bn ($1.399bn)

Massimo Perotti, chairman and CEO, Sanlorenzo says: “The gradual and uninterrupted growth reported, particularly over the last few years, has been built on a clear strategy that has been in place for almost 10 years now.”

Sanlorenzo’s net profit rose 52.8% to €32.5m as of June 2022. Also, earnings before interest, taxes, depreciation, and amortisation (EBITDA) amount to €56.6m, 40.1% higher than last year.

In a Berenberg report entitled ‘Delivering nicely’ provided to Superyacht Investor (SYI), Remi Grenu, charted financial analyst at the private bank comments on the current strength of the market citing Sanlorenzo’s results: “Once again, a luxury yacht manufacturer has published good H1 results, which, in our view, illustrate that the concerns about the impact on the industry of weakening demand, inflation and sanctions against Russian citizens are overdone.

“While [Sanlorenzo’s] net backlog remains very high giving management strong visibility, we note that order intake slightly decreased in Q2 [second quarter],” he says. “Management flagged that this does not reflect weakening demand but is a consequence of the larger backlog, longer lead times for delivery and clients being reluctant to wait so long to receive their yachts.”

Grenu also notes superyacht companies remain attractive prospects for investment due to long-term drivers of growth with the increase in the number of ultra-high net worth individuals (UHNWIs). The low rate of superyacht purchases among UHNWIs and manufacturers’ significant backlogs support this too.

Sales appear to be up across the globe. According to Sanlorenzo’s financial report, sales in Europe are up by 35% and 71% in the Americas compared with the first half (H1) of 2021.

Following this continued growth, Grenu identifies Sanlorenzo’s chairman as a “key man”. He says: “Under CEO Massimo Perotti’s tenure, the group has been successful in implementing its growth strategy. As such, we think that he is key to driving further improvement.”

The report does not come without warnings, however. Grenu says that should the environment deteriorate, this could lead to reduced volumes, order cancellations and, ultimately, declining revenues.

Inventory could also play a factor. “As the group allows customers to trade in their used yachts to buy new vessels, it could suffer from increasing inventory levels if it fails to find new buyers,” says Grenu.

Meanwhile, British shipyard, Sunseeker (pictured above) has also reported a strong order book of more than £600m (€693m) this year, equivalent to two years of its annual turnover.

Sunseeker’s CEO Andrea Frabetti said at the Cannes Yachting Festival earlier this month that sales have been strong, with 12 vessels from its Sunseeker 100 yacht range sold this year already. Although the sales order book is impressive, Frabretti says that it will reinvest the money into the company, rather than allocating to profits.

The British firm is also making a record £40m (€49m) investment in its workforce, with 100 new apprentices already hired this year.

The sailing superyacht market looks healthy too. Finnish yard Nautor Swan also reported an increase in order intake at the Cannes Yachting Festival.

Giovanni Pomati, CEO, Nautor Swan said that there had been stable growth of 44% in the order book to reach about €145m in the first half of this year. The company has sold 32 yachts so far.

“Stable sounds negative but we are stable in comparison to the first half of last year, which was a peak in the industry,” he says.

Charter remains a key part of the market and it continues to grow. Nautor Swan also reported a 50% increase for its charter division compared with last year. Pomati highlighted it as a key role in the company’s business.

“A customer who probably charters a boat and then decides to buy a pre-owned boat from us has the same value as a client who buys a new boat, so we have to take care of them,” he said.

The industry looks poised for another successful year if current results are any indication of prospects in 2023. Berenberg predicts that Sanlorenzo will reach sales of €852m by 2024 and judging by the positive results across the industry, there is high potential for continued stable growth into the next year too. Despite the fears of a global recession, things are still looking positive for the superyacht industry.

Conor Feasey
By Conor Feasey September 20, 2022 15:44