France and the shipbuilding industry. Property of Belon Trade Consulting 1

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1 France and the shipbuilding industry Property of Belon Trade Consulting 1

2 France 5th strongest world power (US, China, Japan and Germany) 5th strongest military power (US, China, India with UK) France is the 2nd largest maritime domain in the world after USA

3 France is doing great! In January 2018 French growth of GDP was announced 1,9% growth of GDP at its highest level since 2011 (Insee) French public deficit has dropped under the 3% threshold for the first time since 2007 (2,6% in March 2018, Insee) Paris stock exchange was at its highest level since 2007 (Insee) Investment is thriving. The International Private Equity Market held in Cannes in January attracted more than 1,400 investors from 27 countries. FDI inflows : in top 10 of FDI host economies in 2017 (UNCTAD, January 2018) Private equity is booming: 16,5 billion in 2017 (+12% since 2016, France Invest) In 2017, for the first time ever, France leads with 2.7 billion funds raised, vs. 2.3 billion in the UK Source: Invest in France Property of Belon Trade Consulting 3

4 Paris hosts thriving capital markets: 1 st European stock market 1 st European bond market 1 st European insurance market Parisisthe2 nd European financial hub after London, hosting 29 of the top 500 corporate HQs and almost all CAC40 listed enterprises. Paris is the new centre for European regulation Paris has been hosting the ESMA since 2011 After the Brexit, the EBA leaves London to settle in Paris Source: Invest in France Paris is more attractive Property of Belon Trade Consulting 4

5 France is reforming In 2017, the new government initiated series of reforms to modernize French ecosystem, to boost its industry, and to promote research and innovation. Improve labor market flexibility Reform tax system Simplify business environment Promote research and innovation Source: Invest in France Employment reforms Improve social dialogue: A new Social and Economic Council, promoting inclusive negotiations, based on simplified majority agreements Rules adapted to SMEs, with sector specific agreement Tailor made contracts for specific needs (fixed term contracts, project based contracts) Reduce social conflict: More transparent procedures for work incapacity and harmonization of deadlines for termination of contract (1 year) Appeasement of dismissal procedures, with financially beneficial solutions Simplifying the labor code: More accessibility, thanks to a digital labor code and standard form More flexibility, with the right to work from home More security, with simplified prevention account for occupational risks

6 Taxation Reforms Source: Invest in France Faster schedule to reduce corporate tax: from 33,33% today to 25% by 2022 Tax relief for the employer: no more payroll tax, 3% tax cut on inter company dividend Replacement of the CICE by a permanent reduction in employer social security contribution Lower taxation on investment income: a single flat rate of 30% Suppression of the ISF and reduction of withholding tax rates on income paid out to non residents Reduction of taxes on acquisition gain

7 Preparing the future with a great investment plan Accelerate the ecological transition: 20 billion Build a society of knowledge and savoir faire : 15 billion Increase innovation : 13 billion Build a digital state : 9 billion Competencies and employment Innovative entrepreneurship Digitalization of health sector Housing renovation Green mobility Green finance Priorities for the future Source: Invest in France

8 Shipbuilding industry in France 9,5 billon persons Newbuild: 3,5 billions Retrofit/repair/maintenance : 1,2 billion Shipbuilding/ship repair passenger/cruise ships and ferries: STX France, PIRIOU, SOCARENAM, CMN: Chantiers naval de Normandie, CNM: Chantiers Navals de Marseille. Shipbuilding Leasure boats: Jeanneau Beneteau: persons Shipbuilding military defense : Naval Group (TO: 1 billion in 2016) oil & gas industry: about persons (Source: baromètre LCL and GICAN June 2017) Exports Cruise Ships 95% Défense 40% Leasure 70% 8

9 MAIN FRENCH SHIPYARDS STX France future FINCANTIERI St Nazaire Naval Group (ex.dcns) PIRIOU/KERSHIP OCEA CNM SOCARENAM Source: GICAN

10 Geographically speaking

11 Maritime business in France Shipowners Carnival, RCCL, MSC, French Navy, French shipowner Bourbon off shore CMA CGM Marseille Head Office Louis Drefus armateurs Ponant SA Setaf Saget Unishipping EVERGAS/JACCAR Oil & Gas TOTAL SA MAUREL et PROM PERENCO Cruise and passenger shipbuilders STX St Nazaire PIRIOU CMN : Constructions mécaniques de Normandie Neopolia Defense Military technologies Shipbuilders: Naval Group, KERSHIP, SOCARENAM, CMN Others: MBDA, Airbus, Thales, Technicatome Clusters Cluster maritime Français (national, incl. shipping and harbor issues) GICAN (national) Néopolia (local: St Nazaire area) BPN (local: Bretagne area) PNM (local: Mediterranean area) Ship repair yards Chantiers navals de Marseille Damen France, Clemessy Services Marine, Piriou, Socarenam Other shipbuilder type Leasure boats: Beneteau Jeanneau Mega yatchs: Ocea et Couach Institutions State, region, department, research institutes etc International Institutions Business France Invest in France Finnish Embassy CCIR International Big Turn Key Contractors Leroy VINCI CONSTRUCTION SOFRESID Eiffel Industrie Marine GESTAL AD Industrie SNEF Designer & engineering STX Solutions AD Industrie Segola Technologies SHIP ST ALPHA TECHNIQUES Arco Marine Marine consultants AMERALYS : Interior fitting management support EUROTECHNIA : Project management support Emobilia: assistance to settle down in France NAVTIS CNIM Property of Belon Trade Consulting 11

12 Fair/Exhibition Description Dates Where Navexpo «Live» Exhibition on the atlantic shore May 2018 Lorient (every year) Euronaval shipbuilding / Military and defense fair October 2018 Paris Le Bourget (every other year) La MerXXL Sea submit and exposition 29th of June 10th of July 2018 Nantes Euromaritime 2019 (every other year) Shipbuilding industry fair for subcontractors January/February 2019 Maybe delayed till 2020 Paris Porte de Versailles Exhibitions in France 5/18/2018 Property of Belon Trade Consulting 12

13 STX France, the new configuration, requirements and warnings 5/18/2018 Property of Belon Trade Consulting 13

14 STX France SA Fincantieri France? Specialist in Cruise ships or big sized ship for the French Navy (working as subcontractor for Groupe Naval ex DCNS). Customers: MSC, RCCL RCI and energy park managers such as DONG energy Staff: employees and rising all the time Subcontractors: over companies Turn over 2016: Million 5/18/2018 Property of Belon Trade Consulting 14

15 STX to become Fincantieri??? Fincantieri +1 % French State Naval Group Ex DCNS Employees 50 % 33,3 % Orders of big sized cruise ships till 2026 Design for STX France but not only 13,6 % STX France SA Sister companies St Nazaire Shipyard France Solutions 2 % Shipbuilding site Big size ships MRE Electrical sub station & jackets Engineering and design Maintenance of the French Mistral ships France Services Maintenance Property of Belon Trade Consulting 15 Source: ouest France/Le monde articles 15

16 What impact will the new configuration have? Negotiations have taken place and everyone seem to agree on the official configuration given in the News papers shown on the earlier slide. Fincantieri has promised not to change much and still does not hold the majority for now. The French states still hold 33% of the shares and will keep the VETO right if needed forbidding Fincantieri to eliminate a competitor or delocalize the production in Italy or China.

17 Why is that not official yet? The French competition authority (autorité de la concurrence) has not given its approval yet The Autorité de la concurrence supports corporate efforts to develop a genuine competition culture, and publishes a framework document on compliance programs to help them move in the right direction* The Autorité de la concurrence also submits draft guidance on its settlement procedure, in order to maximize corporate incentives to cooperate to the swift resolution of antitrust cases* Answer is supposed to be released in June 2018**. At the moment the cruise shipbuilding industry market is hold by 3 players: Meyer shipyards STX France SA Fincantieri Should Fincantieri acquiring STX France is to end up with only 2 players in Europe for Cruise shipbuilding and a major French Italian consortium without forgetting the involvement of Group Naval (global military yard) To be continued *Quotes from the autorité de la concurrence website ** Ouest France newspaper article published on the 2 nd

18 Types of ship Owner Code name Confirmed/options Characteristics Delivery dates Oasis series RCCL/RCI B, C34 confirmed 360 m 6360 passengers 2700 PAX cabins Meraviglia / plus series MSC cruises E,F + G,H (+17 m +200 cabins) confirmed 315,83 m 5714 passengers 2244 PAX cabins Edge class RCCL/RCI J,K + L,H 34 4 confirmed + 1 option 300 m passengers cabins World class MSC cruises WC (no code yet) options 335 m passengers cabins April 2018 mid 2021 Summer Autumn Mid STX France order book for cruise ships 5/18/2018 Property of Belon Trade Consulting 18

19 STX France order book for other projects Code name Period of time Confirmed/options Type of project Order in July 2015 to be delivered in 2016 Confirmed order for 2 offs shore electrical substations P34 type Customer: unknown but from Northern Europe On going projects :more than 20 off shore maritime renewable energy project are quoted per year : either jackets or entire substation. Projects for northern Europe are confirmed, delayed in France due to modification in the projects and validation processes Maintenance contract with DCNS: 3 BPC military ships (helicopter carriers built in St Nazaire) 5/18/2018 Property of Belon Trade Consulting 19

20 Fincantieri and Naval Group Naval Group (Ex.DCNS) is the military shipyard the famous BPC (Russian helicopter ships that were sold to Egyptians) were under their order book but have been build in St Nazaire because of their big size. Fincantieri and Naval Group already has a common agenda and range of product such as the Horizon frigates for the Canadian Navy. Fincantieri is becoming partners with the French companies on 2 sites one for the military and St Nazaire Cruise ship. Source: French medias/newspapers : Ouest France Le telegramme Le Monde Property of Belon Trade Consulting 20

21 Naval Group The French military shipyard Main activities: shipbuilding for defense and military Owners: state 64% Thalès: 34% Services for naval shipyards and bases. Civil nuclear engineering Marine renewable energy Where: all over France and worldwide presence. Global group Presence all over the world Staff: persons Annual revenues: 2,6 billon Property of Belon Trade Consulting 21

22 News and Business Opportunities 5/18/2018 Property of Belon Trade Consulting 22

23 GOOD NEWS FOR NAVAL GROUP Argentina has placed an order The Argentine Navy would be about to order to Naval Group (the French military shipbuilding yard) four military patrol ships (OPV 90) Gowind Class. Ships should be build in Lorient (Britany site: KERSHIP) at least for three of them and the forth one called L Adroit, a prototype, first of he GOWIND Serie will be tested and approved by the French Navy first before sold to the Argentinian Navy. The mount of the contract would be around 300 millions.

24 PIRIOU YARD IN CONCARNEAU BRITANNY AREA New orders of TUG boats Boluda Corporacion Maritima has ordered more ships to Piriou yard to be delivered in Vietnam. This new order comes after the first Serie of 8 ships, 70 tons traction ships built between 2007 and 2009; then 6 units have been delivered between 2015 and The 2 first ones of this new Serie will be delivered in These Tug boats will be sister ships from the model «OST 30» (Omni Stern Tug), their length will be 30,30 m and will be able to pull 77 tons. Created in 1864 in Le Havre (France), Boluda France has a fleet of 75 Tug boats and 30 service ships on 15 harbors in France, Africa and Indian ocean.

25 SOCARENAM IN BOULOGNE SUR MER The ship yard is now mastering LNG propulsion technology Specialist of fishing boats, has up to 27 ships in its order book, 7 are well on their way to be delivered during the spring. The company has now 5 shipyards of production in Boulogne, Calais, Dunkerque, Etaple and St Malo and has now well diversified its production from traditional fishing boats to tenders, patrol ships, fire fighters used by the customs, fire departments and the army. Now the range of boats is wide from 28m up to 62 m. The company employs 250 persons and has a turnover of about 70 million.

26 Posted workers and tax issues Things you need to know 5/18/2018 Property of Belon Trade Consulting 26

27 Posting workers Respecting the French employment law means You must have a company representative in France: a French speaking partner who will sign a document testifying that he/she will represent you and has the competence to do so! You must produce an important list of documents showing that your workers are well treated and well covered socially speaking. The yard do not automatically require all the papers, only the minimum All this takes time and you must prepare the paper work at least 1 or 2 weeks prior arrival What is new A1 is nowadays compulsory to have, this can take months to get, apply straight away for all the workers you suspect might go abroad Medical certificate of aptitude is very highly recommended, meaning that the workers must go to their doctors before they are coming to France to get this certificate. Property of Belon Trade Consulting 27

28 Tax authorities Long term presence in France There is a European agreement in EU, though you still have to declare your activity in each country where you have production or service In France, in some cases you can work about 12 months + 12 months without registering in the French system. After that you must have a permanent establishment, this will generate extra costs : Registration costs Preventive tax to the company on every worker s salary Activity tax on the profit generated in France Property of Belon Trade Consulting 28

29 Marie Zoé Belon Laitinen Pyydyskalliontie Littoinen Finland Tel: Tel: marie@belontradeconsulting.fi Property of Belon Trade Consulting 29