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Cruise Business Commentary: Meyer's Finnish acquisition important for all parties

Meyer Werft's acquisition of a 70% stake in STX Finland and its Turku yard combined with an order for two more cruise ships, with an option for further two, from TUI Cruises in Hamburg that were both unveiled on 4 August are important developments for all the parties concerned.

Shipbuilding

Meyer Werft group and Turku yard

The acquisition means that the Turku yard, a major facility for the construction of cruise ships and ferries, has a reliable and financially solid owner that is committed to build ships there and to develop the business of which will be called Meyer Turku Shipyard.

Many of the previous owners over the past 25 years have either not been committed to do either as they have diversified to numerous other businesses, or as in the case of STX Offshore & Shipbuilding, have faced deep financial problems as a result of expansion that had not been successful.

The TUI order with its options secures work for the yard so that it can re-establish itself as a reliable business partner and provide employment for its staff.

For Meyer Werft itself, the acquisition means the company can now accept orders for vessels that can exceed the size of ones that can be built at its facilities in Papenburg.

The Turku yard has built ferries too, which Papenburg has not focused on, so Meyer may take more interest in that sector of passenger ship building in the future than what has been the case in recent years.

Cruise ship building sector in general

In a broader concept, the focus will now move to the future of STX France. The French government owns a 34% stake in the company, but its Korean owner has put its shares in the French unit up for sale.

Last year, Fincantieri acquired the shares of STX OSV, a listed company spun off from the STX Europe unit of STX Offshore & Shipbuilding, so it might buy the controlling interest in STX France as well. If so, then two builders would virtually share the cruise ship building market between them. In the long run, that could encourage competition from outside.

TUI Cruises

The Hamburg based TUI Cruises currently has three ships in service, with a fourth due next Spring. The two firm orders plus the two options unveiled on 4 August will pave the way for the company's expansion, not only on the German speaking market, but also e.g. in the UK, where the management has indicated TUI Cruises could expand in the future

Royal Caribbean Cruises Ltd (RCCL)

RCCL, the world's second largest cruise shipping group, recently unveiled objectives to improve profitability and to expand its business. In order to meet these objectives, it needs the input of TUI Cruises too, of which it owns 50%. A six to eight ship operation can deliver more than a fleet of just four ships.

In connection with its second quarter 2014 interim results, RCCL published the Double-Double Programme, which it said is designed to achieve two important goals by 2017: increasing the company's Return on Invested Capital (ROIC) to double digits and doubling 2014 earnings per share (EPS).  In 2013, EPS amounted to $2.14.

The company also said it believes that articulating clear and specific goals helps guide internal decision-making as well as better informing investors of the path of the business.

"Our focus over the last few years on improving investment returns with moderate capacity growth is clearly paying dividends," said Richard D. Fain, chairman and chief executive officer.  

"Our brands have never been stronger and we are well positioned for continued step change in performance.  The Double-Double Programme sets demanding, but realistic targets, against which we will measure our continued progress."

By Kari Reinikainen

Carnival Corporation to develop $70 million port facility in Tortuga, Haiti

"Carnival Corporation & plc signed a memorandum of understanding on July 31, 2014, that calls for the development of a new cruise port in Tortuga, an island just off the northern coast of Haiti," says David Candib, Vice President, Development & Operations, Global Port & Destination Development Group at Carnival Corporation & plc.
 
"The amount of investment, per the Letter of Intent, is $70 million and represents the largest cruise industry investment ever made in Haiti, providing a new and exciting destination for ship itineraries traveling in the Caribbean. This also represents a major commitment to the people of Haiti by Carnival Corporation - the largest cruise company in the world, with nine industry-leading brands and dozens of ships operating in the Caribbean, the world's most popular region for cruise vacations.
 
The development will create an exciting opportunity for our guests to enjoy a new, secluded and stunning destination on the island of Tortuga that the company expects will become a highly popular place for guests to enjoy for years to come. At the same time, this commitment will initially stimulate significant development and construction activities, and then tourism business once the port is open, that will create a tremendous economic impact for the people of Haiti. Our initial estimates indicate we will employ more than 900 people directly and indirectly, and the project will be an anchor for further development on the island. We are working together with the Haitian people and government to build Tortuga into a popular and economically sustainable Caribbean destination.
 
This commitment to Haiti is part of Carnival Corporation's larger investment in the Caribbean as a whole. The Caribbean is a crucial market for the success of Carnival Corporation and the cruise industry in general - and we remain committed to creating new and exciting products in the region. The Caribbean is not only the most popular region for cruise vacations, but it is also where Carnival Corporation's roots are, and where the company's nine brands deploy a large number of ships and set sail with millions of guests every year.
 
As we work to develop more diverse itineraries in the region, this new port will complement other popular destinations in the area, including our other Carnival-owned ports of Mahogany Bay, Half Moon Cay, Grand Turk, Puerta Maya and Amber Cove, another new Carnival Corporation port being developed in Puerta Plata, founded by Christopher Columbus on the north coast of the Dominican Republic and scheduled to open with much anticipation in 2015."

TUI Cruises orders two ships, with two options, at Meyer Turku Yard

Mein-Schiff-3

Photo credit: Jouni Saaristo

TUI Cruises has agreed to order two more ships from Meyer Turku Yard, now sold to a consortium of Meyer Werft and the Finnish government, the Finnish minister of the economy and employment told a news conference.

The ships would be similar to the two 99,300 gross ton vessels the company has ordered from the Finnish builder before; Mein Sciff 3 was delivered in the spring and Mein Schif 4 is due to enter service in the spring of 2015.

The exact price of the orders was not disclosed, but the figure would be in the region of €1 billion, Vapaavuri stated. Securing future workload for the yard was a key part of the acquisition of the yard by Meyer Werft and the Finnish government, which was also unveiled today.

TUI Cruises is joint venture between Royal Caribbean Cruises Ltd (RCCL) and TUI AG, the German tourism company.

Meanwhile, TUI Cruises said in a statement TUI AG and Royal Caribbean Cruises are substantiating their expansions plans for the company. The Mein Schiff fleet shall grow from now three to six ships and then 14,000 beds by 2017. TUI Cruises is strengthening its already sound and dynamic position in the German cruise market.

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Photo credit: Jouni Saaristo

Both the Boards of TUI AG and Royal Caribbean Cruises have decided to order the two newbuilds. The Mein Schiff 4 is currently being built and with the now decided new orders of Mein Schiff 5 and Mein Schiff 6 TUI AG and Royal Caribbean Cruises are investing in touristic growth markets. The parent companies of Hamburg-based TUI Cruises expect a sustained high demand in the cruise sector and therefore, in good time, came to the decision to expand further.

Friedrich Joussen, CEO of TUI AG: "In Germany and in Europe the interest in cruises is increasing. The Mein Schiff fleet of TUI Cruises has set a new premium standard in the market and it won new target groups for cruise holidays. The ships are excellently booked to capacity and the company is growing. TUI Cruises and its vessels are a pivotal pillar for our differentiation and growth strategy. Cruises meet the trend and are being discovered by new customer segments." At the presentation of the TUI AG half-year results Joussen had already called the prospects for the cruise segment as highly attractive and alluded to an expansion of the Mein Schiff fleet. This expansion is now being turned into action with the two vessels on order.

Only recently, in June 2014, the Mein Schiff 3 as the first newbuild of the fleet was commissioned by TUI Cruises. Already prior to the launching ceremony on 12 June, the vessel had been nearly fully booked.

The now decided two more ships are on order and expected for delivery as soon as 2016 and 2017. The new cruise liners will be sister ships of the previous newbuilds Mein Schiff 3 and Mein Schiff 4: 295 metres long spanning 15 decks with 1,250 cabins. The majority of the "well-being" ship s cabins, 90 per cent, will be outside cabins with 82 per cent having balconies. The 99,300 Gross Registered Tons (GRT) new build will carry approximately 2,500 guests based on double occupancy.

Both new ships will be built at Meyer Turku Yard, Finland, the majority of which will be in hands of Meyer Werft GmbH. This acquisition is subject to approval by the cartel authority and financing. Richard J. Vogel, CEO TUI Cruises: ''We are pleased that a positive outcome of the negotiations between STX and MEYER WERFT has been achieved. This step ensures that TUI Cruises keeps the valuable know-how of the shipyard. It is the foundation to successfully enlarge the unique cruise products of the Mein Schiff fleet." As Managing Director Richard J. Vogel was responsible for building up TUI Cruises from the very start. By 1 October he will be succeeded as CEO of the Hamburg-based cruise company by Wybcke Meier.

 

Meyer Wert to acquire 70%, Finnish Government 30% of STX Finland Turku yard

Meyer Werft, the German shipbuilder, and the Finnish government have reached an agreement with STX Offshore & Shipbuilding, the South Korean owner of STX Finland and its Turku yard, to jointly acquire all shares in the Finnish company. Meyer Werft will own 70% and the government 30% of the shares, it emerged at a press conference held by Jan Vapaavuori, minister of the economy and of employment.

The price of the acquusition would not be disclosed, Vapaavuori said, adding that financial situation of STX Finland's Turku yard was reflected in the price. The company would be renamed Meyer Turku Yard.

Teollisuussijoitus, a Finnish government owned investment company, will own the shares the government has acquired. The seller is STX Europe, a fully owned subsidiary of STX Offshore & Shipbuilding, Vapaavuori said.

Vapaavuori said the ministry started efforts to solve the crisis at Turku in the spring of 2013. Meyer Werft emerged as a buyer candidate in November of last year. While talks with Meyer Werft progressed well, it was difficult to convince the South Korean owner of the Finnish yard about the seriousness of the inentions of the potential buyers.

A new company has been formed, in which Meyer Werfgt owns 70% of the shares and Teollisuussijoitus 30% of the shares. Teollisuussijoitus would exit the business in due time. The new company would recapitalise the yard.

Vapaavuori said that for a long time, the Turku yard has had a number of owners that have not been committed in the developing of its business. With Meyer Werft, such an owner has been found. 

Princess Cruises orders a new ship from Fincantieri

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Princess Cruises, a subsidiary of Carnival Corporation & plc, has reached an agreement with the Italian shipbuilder Fincantieri to build a new ship, which will  enter service in 2017.

The as-yet unnamed 143,000-ton vessel, which will be built at an all-in cost of approximately 600 million euros, will carry 3,560 passengers, and feature the successful design platform introduced by sister ships Royal Princess in 2013 and Regal Princess which entered service this past May.

The new ship will include the signature elements that have become synonymous with the Princess Cruises guest experience such as a soaring central atrium hub with multiple dining, entertainment and retail venues; the adults-only Sanctuary; Movies Under the Stars cinema experience, and 80 percent of all staterooms with balconies. The ship will also include some brand-new innovations to enhance the guest experience even further.

 “We are incredibly excited to add this fabulous new ship to our already formidable fleet,” said Jan Swartz, Princess Cruises president. “Royal Princess and Regal Princess have been exceptionally successful for us and have received numerous accolades from guests, travel agents and media, so adding another sister ship will enable us to continue to expand our innovative vacation experiences. We’re very pleased that this new ship order is an indication of the confidence that our parent Carnival Corporation has in the future of the Princess brand.” She added that this is the only new order Carnival Corporation & plc anticipates for 2017.

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Specific features and amenities for the ship, along with deployment details, will be revealed in the coming months.

Giuseppe Bono, Fincantieri Chief Executive Officer, commented: "All the orders we win are important for our Group, but some are more special than others. The one we're announcing today certainly belongs to this select category. In fact, it's no coincidence that Fincantieri is the universally recognized leader among the builders of cruise ships. It's a source of great pride to be able to immediately build another ship for a prestigious brand like Princess Cruises following the successful deliveries of two jewels like "Royal" and "Regal," which have already become part of maritime history." Bono ended by saying, "Our objective has always been to build ships of the future, and thanks to the Carnival Group, the leading market player, which has reconfirmed its well-founded confidence in us, we have proven over time not only to have kept faith with this ambitious goal but also to have been able to consolidate our world leadership in a sector of absolute technological excellence, like cruise ships."