Azimut-Benettiís Paolo Vitelli

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Dr Paolo Vitelli is the founder and Chairman of the Azimut Benetti Group, which has current annual sales of €620 million, plus a further €350 million in Fraser Yachts brokerage & charter transactions.

AG-C. China now or ten years ?

PV. Not now, not ten years. I think it will grow but not so suddenly as in other fields. I expect if I have to guess and make a forecast they will be alive in terms of marketing and in terms of production in 2 or 3 years, more or less, combining things with the Olympics, which will have an aspect on the sea as well and will create an infrastructure for yachting.

AG-C. There is a 40 hectare marine site being developed in Shanghai would you be interested in taking part of that development bearing in mind you are already building marinas in Europe?

PV. Not at this stage, we receive proposals from different areas of China and it is not clear to us yet if the boom area will be the one next to a big town, or the one next to a holiday location. Now Shanghai is certainly not a holiday location, because of the dirty waters of the river, because of the commercial traffic, so we have to understand if the demand is more for having the yacht nearby, or more for being in a nice place like the south of China, or the north of China.

AG-C. Thirteen new members have joined the European Union do you regard these as a potential sales area, or an opportunity for cheaper manufacturing?

PV. These are both opportunities short term. We are already selling into this new market, Ukraine is an excellent market, Estonia a very good market and, of course, although not a member Russia is a very good market. Now the potential for manufacturing there is high. Certainly in the European members, but also in nearby countries. Russia is becoming a player for megayachts. Turkey is becoming an important potential competitor in mid size and megayachts and also the Eastern European countries are preparing themselves to be suppliers, not necessarily of the whole boat, but certainly of components like it happens for cars.

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AG-C. Hurricane Katrina devastated much of the US Gulf Coast. Not withstanding the human loss, do you consider this a disaster, or a potential  sales opportunity once insurance claims are settled?

PV. At this stage it is a disaster. A human disaster because of the victims and because of the damages and the slowing up of the American economy in an area that was particularly needing support and growth. From a boating point of view, my information is that the biggest mega yacht shipyard there has had minor damage, so it didnít have major consequences, fortunately, for them for they are very nice colleagues with a very good order book. I sympathise, but I understand the effect is minor. In terms of boating areas it was not one of the largest in the States; there are certainly damages to the boats, but I my concern is the human aspect, more than the business aspect in the States, at this moment.

AG-C. Will rising oil prices have a major impact on sales soon and, perhaps more importantly, on production costs?

PV. It has an impact, but so far it is acceptable because a 20% increase in the price of the diesel, when the diesel is maybe 5% of the total cost of running the boat, means 1% increase in the total running cost of the boat, so it is not such a high impact. If, on top of the price increase, we will have a shortage, or we will have a price going much higher, then we might have a real impact. For the moment I donít sales slowing up  for that reason.

All the  production costs are rising, especially fibre glass resin is rising, all products coming from oil, our heating is rising, our transportation is rising and that is a problem, but the yachting industry has got the potential to offset some of those costs, with the industrialisation of the product. The industry is still backward, it is still behind the rest of industry, so we have a chance to offset these costs by getting more organised.

Questions about the Azimut Group.

AG-C. At your press conference, when speaking of acquisitions, you said there were difficulties in confining entrepreneurial spirits within a group policy. Surely, those spirits created the company you wanted to buy , so wouldnít it be better to let them run free and continue in their own way?

PV. To continue in the entrepreneurial spirit you need an entrepreneur. If the entrepreneur remains in the acquired company itís fine, but if the entrepreneur, after a few years, wants to enjoy all the cash money that he made - mavbe he wants to go boating, or travelling around the world, then you have to replace him. You cannot replace entrepreneurs easily, so you have to replace with a management team and this is the real problem, solving the changing of the philosophy of the company when an entrepreneurial spirit turns into a management organisation.

AG-C. Surely, there must come a time when Azimut Group must take over other companies to continue to grow, or perhaps to prevent a rival acquiring a certain company?

PV. It is not said that we have to grow, it is not said that we have to acquire companies in order to grow. At the moment we have the opportunity to grow because the market is good. When we see the market is stable, we might concentrate our efforts into industrial organisation, so acquisitions are not a necessity for growth. We take opportunities to enter new segments of the market primarily to give stability to our group.

AG-C.  Can you enlarge on the integration of Fraser Yachts into Azimut Group and the advantages for the Group and your boat owners?

PV. Integration will mean we are able to offer Azimut Bennetti owners Fraser services; like managing their yachts, like a privilege service in chartering their yachts, like inventing a new business activity, like fractional ownership. Fraser is a tool, a perfect machine, to materialise all these opportunities and we have plans for making this happen in the next 12 months.

AG-C. Your development in Moscow. Is this a gamble? Is it  going to be a floating showroom for Azimut, or will it grow into a real marina?

PV. It is a combination of the last two. I donít think it is a gamble, because our plans have been accurate and our partners are first class. I expect that it will be a fantastic showroom for our product and, in the meantime, an opportunity to do business by receiving and hosting more boats in a nice environment. At the moment the marinas available on that lake are not quality ones. By creating one of high quality we achieve exactly what you said, an opportunity to sell more boats in a quality environment, an opportunity to do business by the hosting of boats and servicing them in our marine.

AG-C. Thank you Dr Vitelli for speaking with BYM.