This article first appeared in The Edge Financial Daily, on March 3, 2016.
KUALA LUMPUR: Genting Hong Kong Ltd, operator of the Crystal Cruises, Dream Cruises and Star Cruises cruise lines, which is 17.8%-owned by Genting Bhd, has acquired three shipyards in Germany from German shipbuilder Nordic Yards Group for a combined €230.6 million (RM1.04 billion).
Genting Hong Kong said the purchase of the three shipyards in Wismar, Warnemunde and Stralsund, along with the Lloyd Werft shipyard in Bremerhaven, Germany last year, enables the group to realise its global cruise ship fleet strategy over the next decade for its three brands.
“The rapid growth of the world cruise industry, especially in China, has led to cruise ship order books reaching an all-time high,” said Genting Hong Kong chairman and chief executive officer Tan Sri Lim Kok Thay in a statement yesterday.
“In order to ensure that the group can build the required number of cruise ships in the next decade for our global fleet expansion, it is strategic that we acquire shipyards that can build our cruise ships on a timely basis and in a more cost-effective manner,” he added.
The newly acquired yards and Lloyd Werft will be managed as Lloyd Werft Group.
Genting Hong Kong said ownership of the shipyards will free it from both the delivery timing and pricing uncertainties associated with the cruise ship order book cycle, which is at a historic high, and allows management to focus on the strategic planning, design and deployment of its planned cruise ships among its three brands.
It noted that the Wismar shipyard’s dry dock measures 340m long and 67m wide, while the Warnemunde shipyard’s dry dock measures 320m long and 54m wide, and both are capable of building cruise ships larger than the largest cruise ships currently afloat.
The Stralsund shipyard, meanwhile, has a ship lift to launch cruise ships and mega yachts up to 270m long.
“These shipyards, with further investment, will have a steel fabrication capacity of about 150,000 tonnes a year, sufficient to build a number of cruise ships and a mega yacht per year,” said Genting Hong Kong.
“With all the yards situated in Germany, the Lloyd Werft Group, with approximately 1,700 experienced management and workers, is well placed to succeed as one of the best cruise and mega yacht shipbuilding companies in the world,” said Lim.
“The investment in the Lloyd Werft Group will have good returns from the 10-year planned order book, fitting perfectly with Genting Hong Kong’s global cruise strategy and is in the long-term interest of the group,” he added.
The Singapore-listed cruise ship operator told the Singapore Exchange yesterday that it had entered into a sale and purchase agreement with Nordic Yards Wismar GmbH, Nordic Yards Warnemünde GmbH, Nordic Yards Stralsund GmbH and Nordic Yards Service GmbH for the acquisition of the three shipyards.
It expects to fund the purchase through internal resources.
According to the group’s latest annual report, as of June 30, 2015, the group’s cash and cash equivalents stood at US$1.45 billion, while total liabilities were US$1.15 billion.
Genting Hong Kong on Feb 2 issued a profit alert, notifying investors that it may record a significant jump in its net profit for the financial year ended Dec 31, 2015 (FY15) of not less than US$2 billion (RM8.32 billion), compared with US$331.7 million in FY14.
It attributed the expected increase in net profit to a US$658.6 million gains from the disposals of certain stakes in Norwegian Cruise Line Holdings Ltd (NCLH) and a one-off accounting gain of US$1.57 billion recognised upon completion of a secondary offering of NCLH shares in May 2015, among others.
It is expected to release its FY15 results this month.
Shares in Genting Hong Kong closed 1.59% higher at 32 US cents yesterday, valuing it at US$2.71 billion. Genting’s share price, meanwhile, was up 17 sen or 2.07% to settle at RM8.35, with a market capitalisation of RM31.19 billion.
