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
