A Turning Tide

It's been a choppy few years for the marine industry, buffeted by headwinds from the global economic downturn. But there are signs of more favourable seas ahead for this important sector of the New Zealand economy which has set itself some ambitious targets. Suzanne McFadden reports.

A cluster of cats whip and cartwheel across the water in the world's most glittering ports, flaunting New Zealand's nautical prowess. It's not only the Kiwi sailors on board these nimble, explosive catamarans, the AC45s, who are earning the kudos as Emirates Team New Zealand dominates the spectacular show. The boats ushering in the next generation of the America's Cup were built by Kiwi boatbuilders using Kiwi know-how, technology and innovation at the Warkworth premises of Core Builders Composites.

As Peter Busfield, executive director of the marine industry's association NZ Marine, points out, regattas like the America's Cup World Series events in Cascais, Plymouth and San Diego are invaluable to our marine industry. When the world's movers and shakers - the billionaires and sheiks with dollars to burn - see New Zealand striving and succeeding on the international sailing stage, they also discover just how accomplished we are at building the boats we're racing.

"Because we could never afford to advertise in European magazines, where an ad costs about $25,000 a page, we get more mileage participating in events and networking", Busfield says. He pays credit to New Zealand's rich sailing history - the Olympics, the round-the-world race, the Sydney to Hobart, Admiral's Cup, and then the America's Cup - for helping establish New Zealand's marine sector as the number one manufacturing industry in the country.

Reputation speaks volumes right now in the boat building world. In recent years, as the global economy has unremittingly rumbled and groaned, and the rich and influential have grown more wary of being seen as ostentatious with their discretionary spending, it has become understandably tougher to lure the big spenders - especially to far-off southern shores. In late 2008 and 2009, the marine industry floundered, both here and worldwide, sinking a number of Kiwi boat businesses. But the tide appears to be slowly turning again, and optimism is high that the industry here will undergo strong growth over the next decade.

As a whole, the industry is expecting to grow from its present turnover of nearly $1.7 billion per annum to over $3.7 billion by 2021, Busfield says. "If everything goes to plan, by then we will be contributing approximately $1.54 billion a year to New Zealand's export earnings." This heady prediction of eight percent growth each year is not a number Busfield has trawled from the sea; it's based on a recent independent survey of 330 Kiwi marine companies which forecast the industry will double in size over the next 10 years, creating another 9,000 jobs. "That's pretty bullish," he concedes. "But we're now in a position where we're confident of success."

New Zealand's marine industry remains at the top of the country's manufacturing sector because of advice taken - and ignored - back in the 1990s, Busfield believes. The industry listened to American business adviser Dr Michael Porter who identified New Zealand's marine industry, along with farming, as having a point of difference worldwide and a good opportunity of being profitable going forward. And while individual manufacturers were being told by financial advisors to get out of manufacturing because it was seen as a "sunset" sector, Busfield says most in the marine industry defied that advice and stuck to their guns. "Passion has had a lot to do with it - we love to build boats, sell boats, service boats. And the industry has got much more proficient and efficient."

So what exactly will deliver on those ambitious growth targets? Superyachts, the luxury sailing and motorboats built almost exclusively for overseas owners, could be one answer. Although orders have slowed this year, New Zealand's "big four" superyacht builders - Alloy Yachts, McMullen & Wing and Yachting Developments in Auckland, and Fitzroy Yachts in New Plymouth - all have work in their yards. Even if the demand for new-build superyachts continues to slow, New Zealand plans to capitalise on its wealth of technical expertise plus new big-boat berthing facilities in Auckland to capture a decent chunk of the refit market.

"The refit industry is almost an insurance policy," Busfield says. "As the global economy gets worse, the refit industry is likely to get better. Instead of buying a new boat, many owners may spend $10 million on a refit. We have the craftspeople here, and with the planned expansion of superyacht new build and refit facilities at Wynyard Quarter and Yard 37 at Hobsonville, Auckland is well positioned for additional superyacht business." (See following article.)

Like our sailors, New Zealand boatbuilders are renowned the world over for their abilities and "Kiwi can-do" attitude. In the past seven years, New Zealand has turned out over 1000 newly-qualified boatbuilders, and there are now 550 active apprentices in the largest marine apprenticeship scheme in the world.

Large-scale work from superyachts naturally has a spin-off for locally-made marine equipment, like sails, rigging and spars, marine electronics, composites and adhesives. Take Doyle Sails, for example: it has built strong relationships with Kiwi superyacht companies which in turn has strengthened its international reputation for hi-tech sails. But managing director Chris McMaster admits that their involvement in a superyacht project comes "right at the end of a food chain", and sometimes, it's a matter of survival until that work kicks in.

Boaties with less lofty aspirations of grandeur have helped shore-up the industry too in the past 12 months. The export of recreational boats (including superyachts) has climbed to $300 million, just shy of the 2008 peak in export sales, and smaller boat exports are also a big part of the future growth picture, says Busfield.

Busfield describes the growth of the trailer power boat business as "a bit of a success story", as exports stretch to North America, Russia, the South Pacific and perhaps most crucially, Australia, helped by a more favourable exchange rate with that country. "We're finally getting a market share across the Tasman. New Zealand is quietly increasing market sales through persistence - when times are tough, the tough only get better."

Invercargill-based Stabicraft, a pioneer of rigid-hulled aluminium pontoon boats, has seen a definite pick-up in business, with the United States export market presenting new opportunities too. One motor launch builder enduring the downturn has been Next Generation boats in Greenhithe. Demand for its marque Salthouse Corsair boats has grown, and owner Dean Salthouse believes the decision to invest in research and development of the boats during quiet times is paying off.

But not everyone is experiencing the buoyancy yet. Lionel Sands of leading pleasure boat brand Haines Hunter says in reality, business is running at half-throttle. "Market conditions are still soft. I expect we will get a seasonal lift, but there will be no miracles in the next 12 months," he says. "The top end of the market, the bigger-ticket boats, are doing okay, but the entry level boats are battling. The positive thing is that there's no better time to buy a boat."

At R Marine NZ, which imports Riviera luxury cruisers from Australia, managing director Bruce McGill agrees it's been a tough couple of years but says the company is experiencing an increase in sales this year. It currently has a 75 Flybridge under construction for delivery in May next year and is just about to deliver a new 61 Series II Flybridge to a first time Riviera buyer. "Right now our new boat enquiry is based around Riviera's larger models, 50 feet and over. Many of our clients feel that they have put off their new boat purchase for too long because of the GFC and are saying to us that they want to get on with enjoying life," says McGill. In a more challenging sales market, the company has focused on considerably expanding its service division and now offers a full boating concierge operation, an initiative which helped R Marine NZ pick up the Riviera Dealer of the Year Award in August.

Every now and then, a new success story bubbles up to keep the optimism afloat. Stories like Core Builders Composites which helped bring the America's Cup deal worth $10 million to New Zealand shores. Core Builders - a subsidiary of Oracle Racing, holders of the America's Cup, and run by highly-experienced Kiwi boatbuilders Tim Smyth and Mark Turner - created the 10 new one-design AC45 multihulls now being sailed by cup teams from around the world. By bringing the business down under, it employed around 50 staff, many locals, and engaged the expertise of other New Zealand companies like Cookson Boats and Hall Spars. And the work doesn't end there - Core Builders is now working on building the wingsail, beams and foils for the racing machine in which Oracle Racing will attempt to defend the cup in 2013.

Another happy story is Hakes Marine, a Lower Hutt composite yacht manufacturer which faced falling trade with the onset of the global recession, and was forced to lay off staff. Now it's building training catamarans for Emirates Team New Zealand - the sleek black SL33s a miniature version of the big AC72 multihulls to be raced in the next America's Cup. Syndicates from China, Korea and France have also expressed interest in these. Just as New Zealand's America's Cup heyday of 1995-2003 brought a swell of business to our marine industry, a new wave is forming which is likely to gather further momentum particularly if Emirates Team New Zealand's early success on those sleek, fast moving cats turns into a successful challenge for the Auld Mug. Then the Government's much criticised $36 million investment in the Kiwi campaign for a "rich man's trophy" may turn out to be a very astute investment after all.