Our marine export sector is no place for pessimism. And encouraging signs coming from the US, the world’s biggest consumer of marine industry products, should be cause for more confidence here. Exporter gauges the mood of one of New Zealand’s most important export industry sectors.
Peter Busfield has the best office – right smack bang in the middle of Auckland’s bustling Westhaven marina. He also has a pretty good view when it comes to weighing up the state of our marine export industry. Tracking its performance is one of the roles of the New Zealand Marine Export Group – the specialist export arm of the New Zealand Marine Industry Association – where he is executive director. It’s also their job to support the growth of New Zealand’s marine industry as an export sector, and he’s the first to admit that the past few years of world economic recession have been a time of headwinds and choppy seas for exporters. However, Busfield tells me there are signs of smoother sailing on the horizon, and that’s largely due to the fact that confidence in the US ‘mid-range’ market is on the rise.
“Forty-five percent of all marine industry products are consumed by the US, so stats provided by that country are a good guide on how the world’s going.”
In the sub-sectors of trailer power-boats and outboard motors the US market was consistently up by 12 percent in 2012 over 2011, he says. “People will only buy a new boat or outboard motor if they’re feeling confident, and confidence drives the industry worldwide.”
That said, the medium-to-high end of the launch market (boats around half a million to two million dollars) is still tough he says. The order book for new superyachts has also slowed as Europe as a market has been declining – thanks to the economic turmoil, high Kiwi dollar and competitive market forces.
As part of its international marketing strategy the NZ Marine Export Group organises a combined exhibition of up to 30 New Zealand companies at the Fort Lauderdale, Monaco and METS international boat shows each year, and there were more encouraging signs at last year’s events. He expects market confidence to pick up further at these shows in 2013.
Busfield says it’s also important to take into account some of the positive underlying factors impacting on the marine industry worldwide. For example, 50 to 70 years olds (‘empty nesters’ or ‘baby boomers’) are by far the biggest spenders and they’re seeking to enjoy the fruits of their labours in bigger than ever numbers. The target market in this age category has increased by 30 percent worldwide in recent times, he says. “The pastime of boating worldwide is not exactly going out of fashion either,” he says. “People are using their boats more than ever.”
Marine industry exports are a significant earner for this country. In the current NZ Marine Export Group Strategic Plan, it states that total export receipts in 2010 were $650 million – down from a pre-GFC high of approximately $840 million. The goal is to grow that figure to $1.1 billion in 2015.
Boat production makes up the bulk of export revenue ($426.7 million in 2011) – but perhaps the greatest expectation for growth comes from other earners such as refits and maintenance, marine equipment and services (such as cruising and supply) and componentry for offshore boat builders.
Worldwide, marine is still a massive industry – Busfield values it at around US$70 billion, admittedly down from the peak of US$90 billion, but with New Zealand’s three percent share of the market fairly static. There is potential for our market share to go up he believes.
The marine industry is also a significant employer in this country. “In fact it’s the largest manufacturing sector remaining in New Zealand, and exports a third of what it builds.”
The market that floats to our shores
Busfield says the superyacht refit market holds a great deal of promise.
“There are 7,000 superyachts floating around the world, mostly motor boats, less than 12 years old, and generally they have a refit every five years. Through analysis we know that there are more than 1,000 superyachts that either need a refit or their owners are wanting to do one.
“We’re planning to increase the number of annual refits carried out in New Zealand from the current 25 to 50,” he says – adding that there is pressure to provide facilities to achieve this, and New Zealand needs more examples like the Auckland Council-funded infrastructure at Wynyard Quarter.
“The secret to success is promoting ourselves as a tourist destination [for cruising local waters], rather than just a refit destination. Visiting skippers will quickly realise that our refit industry here offers the highest quality workmanship in the world at a price that’s on a par with other developed countries.”
Busfield says a typical 40-metre boat that undergoes a six-month refit here generates around $5 million income for the local marine industry and an estimated $1 million for the local economy (accommodation, retail, transport, leisure activities etc).
“We treat it as an export market that floats to our shores.”
All components and work done during qualifying (temporary import entry) refits attract zero percent GST – that’s a healthy incentive to help boat owners save money while generating valuable foreign exchange earnings.
The America’s Cup is a significant generator of profile and business for New Zealand’s marine export sector too. Leading-edge technology developed right on our doorstep for the campaigns is then transferred into world markets as products. Doyle Sails is one good example, says Busfield – a company that doesn’t just make the sails in New Zealand but actually weaves the cloth for the raw material. Southern Spars is another example, with its carbon fibre composite product – currently it has a 90 percent share of the world superyacht spar market.
In terms of the boat building market, while the glamorous superyachts hug the headlines, it’s
the commercial boat sector – the
likes of ferries, tourism boats, barges, fire and rescue boats, and so on – that is quietly building up more export momentum, particularly across the Tasman.
“Traditionally many of these would have been built in Perth, because the Australian Government had always been very supportive of local boat building operations there. Once they reduced their subsidies and support it opened the door to New Zealand boat builders,” says Busfield, citing Whangarei’s Circa Marine, Palmerston North’s Profab Engineering and Wanganui’s Q West boatbuilders as examples of companies which specialise in exporting large custom- made aluminium boats.
Diversity
One thing you soon learn about the marine export industry is its amazing diversity. You may have heard of marine electronics specialist Electronic Navigation (ENL Group) with its WASSP multibeam sonar; C-Tech and its high-tech carbon fibre sail battens; panel-mounting system specialist Fastmount, winning customers all over the world – the list goes on, and Busfield can rattle off most of the players.
One company that is enjoying considerable export success is Vesper Marine, which has its head office not far from Busfield’s. Vesper Marine is best known for its innovative marine safety products which use the marine based Automatic Identification System (AIS). It’s AIS WatchMate collision warning devices and Virtual AIS Beacons are sophisticated systems that have been leading the charge into new markets, including port authorities and oil and gas companies.
Launched in 2007 by Deirdre Schleigh and Jeff Robbins, with a clear goal of exporting marine safety technologies, the company today has more than 120 dealers representing its products in 34 countries – as well as strong online retail sales. And more than 95 percent of sales are to export markets. Mike Ogle, general manager of sales and marketing, says while there was a general lull in many markets since the GFC, Australia has proved to be quite steady throughout.
Ogle says the challenge in 2013 is to build ‘quality volume’ into their dealer channel – improve communication with dealers to assist their sales and manufacturing forecasting.
“The exchange rate is a factor for every exporter; however we are also an importer of components so it’s swings and roundabouts. We also need to understand cross rates with multiple currencies as we sell online worldwide in five different currencies. This, along with VAT/GST issues in different jurisdictions, makes for some complex decision-making when setting price points for products.”
His advice for other marine exporters? “Never lose touch with your end customers’ needs; plan to spend money on being in-market and be ready to adapt your course if a real and significant opportunity presents itself.”
Katikati-based Stainless DownUnder is another exporter with significant offshore markets that has had to work hard to build sales. “2013 is shaping up well so far; there have been plenty of enquiries,” reports MD Andrew Lilly. “However, we have to work very hard to get them over the line. The dollar is difficult and we are finding that yards are more patriotic than we have found before.
“Our most significant advantage is supplying innovative product that few of our competitors have an appetite to produce. We are making good headway into northern European yards. We also need to be in front of our customers more and more to show that there really isn’t a huge distance between New Zealand and Europe.”
Australian growth
For a number of exporters, Australia has provided healthy returns in the face of the GFC’s impact. Stabicraft Marine is one such firm. Founded in 1987, it was the first in the world to weld the positive buoyancy of the inflatable into an aluminium workboat, durable enough to tackle the biggest seas. This crossbred was a tough little workhorse loved by commercial fishermen, who quickly spread word across New Zealand, into Australia, the US and Canada about ‘the perfect working boat for the seafaring man’.
“New Zealand and Australia are our strongest markets making up roughly 80 percent of turnover,” says CEO Paul Adams. “Although promising in terms of similar market needs to New Zealand and few comparable competitors, the North American market has proved difficult over the past few years due to the exchange rate.
“Export sales over the past 12 months have been satisfying, mainly through significant growth in our key Australian states. Highlights have been continued commercial and rescue sales in Australia, such as the Victorian Coast Guard, but the one sale that stood out for me was to Salt Water Incorporated in Alaska. Salt Water Inc. chose us after significant research to manufacture nine vessels for fishery monitoring roles. The vessels experience a wide set of operating conditions – near shore, offshore, rough and calm – and carry a crew of two for up to ten hours a day.
“It was a real coup for a New Zealand company to be chosen over local manufacturers and testament to the ability of our product and our manufacturing prowess,” says Adams.
For Stabicraft it’s a case of going for the lowest hanging fruit, such as Australia, rather than stretching for new territories. Funding is the biggest hurdle, says Adams, and exchange rates a major concern. “Our North American market is one of great opportunity but we simply cannot compete with the current and recent exchange rates. The pressure is great enough that we are considering local manufacturing options.”
Despite these challenges, and provided nothing new upsets the world economic apple cart, Stabicraft is aiming for a 30 to 40 percent increase in export sales this year. Adams puts their success down to good business practice. “Loyalty, respect and a desire to achieve are mandatory for long term success. Although difficult, protecting cashflow and maintaining a competitive work environment are also important,”
he says.
“Globalisation has opened up a world of niche markets. When once you had to offer broad products to satisfy large numbers of consumers, you can now market your products to more people with the same ideals and needs than ever before, and fairly easily.
“Just remember, knowing your customers and being confident in yourself are the most important parts of the puzzle.”
It’s in our pedigree
Think superyachts and one of the first names that springs to mind is Taranaki-based Fitzroy Yachts – a firm with an engineering and fabrication pedigree spanning many decades.
Managing director Rodney Martin points out that it’s the pedigree of the boatbuilding industry in this country that keeps it top of mind for potential buyers of sailing superyachts.
Also in our advantage, he believes, are our labour rates – which compete strongly with the Europeans, particularly the Dutch yards.
New Zealand is known to punch above its weight as a sailing nation, the America’s Cup campaigns have proven that fact, says Martin. “I once asked a client why New Zealand is a first-choice when it comes to building boats. His reply was that from a European point of view, when you’re looking for a rugby coach you automatically think Kiwi – it’s the same when you’re looking to build
a yacht.
“New Zealand’s economy, unlike Europe and North America, is seen as relatively stable,” says Martin. “We’re also known for our straightforward attitude – if we say we’re going to do something – we do it. Clients find that refreshing.”
While the exchange rate does make life “incredibly hard”, 2013 is looking promising for Fitzroy Yachts with a number of new projects under discussion, says Martin, involving both refit/conversions and new builds. “The GFC affected our clients, just as it did everyone else, but because this industry has such long lead times and a long tail, and every superyacht builder had plenty of work in late 2007, it’s only in the past couple of years that the industry has slowed down and a degree of rationalisation taken place.”
Against this backdrop there have been a number of trends happening in the superyacht industry, he says. The boats are bigger – and trending to sail rather than motor. “They’re buying for exploration and cruising,” says Martin, “and there’s a greater awareness of what’s environmentally responsible.”
Repeat business is increasing – Zulu I and Zulu II were built by Fitzroy Yachts for the same clients, as were the two Salperton yachts. “You tend to form close relationships with these people, and they refer business on to you too,” says Martin. “Clients get closely involved in the whole building and developing process, and we make sure they always get VIP treatment.
“This is a small industry and unless your clients can speak highly of you, your time in it will be limited.”
The relationship doesn’t stop once the boat is delivered to the client either. Many yachts compete on the world’s regatta circuits – and Martin informs me he is off to help crew on a Fitzroy-built yacht in the Caribbean in March. “Spending time with the owner will allow us to evaluate the boat’s performance and note any potential improvements,” he says, adding that he’s following that up with a Mediterranean regatta in the middle of the year. Such is the nature of the super-yacht industry – there is a lot of travelling involved – especially to the big international boat shows.
With 160 staff on site, and a fair chunk of the local business community to support, the pressure on Fitzroy Yachts, like many other local boat yards, to bring in consistent work is enormous. But Martin says they’re up to it – driven by a passion to build a product that is ‘best of class’ in the world. That’s what they get excited about.
Is there anything that can be done to help boost New Zealand’s marine industry? Investing in more new infrastructure would make a big difference to boosting industry efficiency, says Martin. And that’s where he sees government having
a role.
Servicing the world’s fleet
While much of the marine industry has been in the doldrums in recent times, NZ Marine’s Peter Busfield says the world’s existing fleet of boats is enough to keep most firms here buoyant and provide ongoing work.
“We must adapt our business model to where the business is going to be. For example, Kiwi firms may not have high volume production line capability, but they do have extensive expertise in custom boatbuilding.
And refit and maintenance work largely requires a custom approach.” Kiwi ‘trades-based’ craftsmanship and ingenuity is a natural fit when you’re fixing things on a floating vessel and you have to work within certain limitations, he says.
“This is where New Zealand excels, and it helps that we have the highest ranking boatbuilding apprenticeship system in the world, through the New Zealand Marine Industry Training Organisation. Around 1,400 people have graduated from the programme (which has also been licensed overseas) over the past ten years, and while many go overseas to further their careers, many come back with even greater skills to help build and refit those superyachts.
Auckland, with its Hauraki Gulf cruising ground, international airport, luxury hotels, large concentration of boat servicing companies in and near the Wynyard Quarter, and improved facilities for hauling boats out of the water, really ‘cuts the mustard’ as a one-stop-shop, says Busfield.
All in the same boat
NZ Marine is pleased that NZTE has acknowledged the potential of the marine export sector and is committed to supporting marine manufacturing and export service related activities. The Tertiary Education Commission is also right behind training initiatives – NZ Marine with the support of the Ministry of Business, Innovation and Employment assist competing companies to work together. It would seem that there is solid government-funded support for the industry.
However, Busfield believes there is still room for a closer, more trusting relationship between the industry and government agencies – “one which, for example, doesn’t require all the forms and paperwork.
“We’d like to see a genuine, pragmatic partnership with the marine industry, one requiring trust but also potentially incurring some risks – in order to forge more sales.”
He says sometimes there is too much focus on new markets, when often there’s more ‘bang for buck’ by increasing our share of established markets.
“I’ve also yet to see any significant evidence of success of the Government’s strategy to encourage offshore investment into New Zealand marine industry companies, to generate additional foreign exchange earnings and local employment.” He says the danger is that only the skeletons of companies get left here, with manufacturing arms being moved offshore. The Government should be directing taxpayer funds to where it can best support existing manufacturing and related training and jobs in this country, he adds.
“With a few exceptions we are a country of many small companies and the Government may not realise how much value they can deliver by providing the glue – an opportunity for competitors to get together and do something on a collaborative basis, all through an independent facilitator. Providing that nucleus of momentum is something we must build around, for the sake of individual companies and the country as a whole.”
