The super yacht is a globally recognised symbol of affluence. Russian oligarch Roman Abromovich commissioned the building of the largest one in the world last month, the Sheik of Dubai has one with a full spa and the Al Said yacht, owned by Sultan Qaboos of Oman, has a concert hall with space for a 50-piece orchestra. But as the wealth of the super rich declines and the market for luxury products contracts, how are family-owned yacht manufacturers faring?
Camper & Nicholsons has been synonymous with luxury yachting since a 14-year-old Ben Nicholson joined a shipyard in Plymouth, UK run by William Camper. Camper & Nicholsons was officially formed in 1863 and is still managed by a fifth generation member of the Nicholson family, George Nicholson.
The firm has survived two world wars, the great depression of the 1920s and more than a few company shake-ups. However, the global downturn is the latest challenge the family-controlled business needs to conquer. Sales during the last quarter of 2008 showed a significant slowdown, even for a period that is not traditionally buoyant. The charter side of the business did not prove immune to the effects of the downturn either and the slow start to 2009 was a marked contrast to the booming beginning of 2007.
For the Italy-based Ferretti the story is similar. The yacht-builder highlights smaller motorboats as an area that has been particularly affected in the current slump, whereas sales of larger yachts have remained relatively stable. The slowdown caused Ferretti to make redundancies at some of its shipyards in an attempt to address the company's €1.1 billion of debt.
One of the aspects of this downturn that proved particularly difficult for the industry to cope with was the speed at which is set in. This is evident at Ferretti, who entered into a loan agreement at the beginning of 2007 when the market was at its peak. The sudden change in industry fortunes caused the company to default on loan repayments and it has been in debt renegotiations since February.
Ferretti hopes the finalisation of debt restructuring, announced last month, will signal a move away from the difficult beginning of 2009. The restructuring deal gave Norberto Ferretti, company chairman and one of the founding Ferretti brothers, majority voting shares. (Click here to read our interview with Norberto Ferretti)
Camper & Nicholsons is also hoping to put the last year behind it as more recent 2009 sales and charters show some signs of recovery. "Things have improved a lot since spring, although they remain far from satisfying compared with 2007 and early 2008," says Laurent Perignon, marketing manager at Camper & Nicholsons. "The surprise, or rather some form of positive outlook, is that although it has been rather uneven at least there has been good activity."
Both businesses benefit from their diversification at a time when luxury industries are particularly suffering. Ferretti does not just specialise in selling super yachts, it manufactures yachts in a variety of sizes and materials for a range of buyers. Camper & Nicholsons has also diversified into a company that does more than just brokerage sales; the business covers all areas of yacht management, charter and construction.
Although the yacht-builders may be struggling, the downturn has created increased opportunities for buyers to purchase yachts at reasonable prices. Camper & Nicholsons have advertised several reduced priced yachts over the summer, while the second hand market has seen price reductions across all sizes. There are bargains out there for those who know what to look for and know what they want.
After a decade of excellent growth for the yachting industry as a whole the slowdown came as a shock to the two family-run businesses. However, first half results are traditionally lower for yacht manufacturers as they require cash to complete commissions in time for the summer sailing season. The timing of the financial crisis only served to exacerbate traditional seasonal differences, in some cases causing businesses some sever cash-flow problems. Increased summer sales have given manufacturers some hope, but the real test will be if the summer upsurge can last the rest of the season.