Carnival Corp. Reports Lower Third Quarter Net on Lower Revenues
By Theresa Norton Masek
September 25, 2012 11:29 AM
Carnival Corp. & plc announced non-GAAP net income of $1.2 billion, or $1.53 earnings per share, for the third quarter of 2012. Revenues were lower, at $4.7 billion compared to $5.1 billion during the same period last year, but Carnival Chairman and CEO Micky Arison said third quarter non-GAAP earnings were better than anticipated in the company’s June guidance due primarily to a combination of higher-than-expected revenue yields and lower-than-expected costs, partly due to the timing of certain expenses.
“The significant efforts of our brand management teams were successful in partially mitigating the decline in cruise ticket prices,” Arison said. “Onboard revenue yields (constant dollars excluding Costa) improved 3 percent during the quarter. Our brand managements’ continued focus on cost containment contributed to a 3 percent reduction in cruise costs (constant dollars excluding fuel) as well as a 6 percent reduction in fuel consumption on a unit basis.” Arison also noted that the company repurchased 2 million shares valued at $67 million during the third quarter, “demonstrating a continued commitment to returning excess free cash flow to shareholders.”
Fuel prices decreased almost 4 percent to $659 per metric ton for the third quarter from $686 per metric ton last year. However, fuel prices were higher than June guidance, costing an additional $18 million, net of realized losses on fuel derivatives.
In keeping with Carnival’s previously stated strategy of introducing two to three new ships per year, Arison said the company has seven new ships scheduled for delivery between 2013 and 2016, some of which will replace existing capacity reductions from possible sales of older ships. Arison also said the company expects to direct capacity growth toward the continued development of emerging cruise markets. The company has almost tripled its guest sourcing from emerging cruise markets in the past five years. For 2013, the company will capitalize on the increasing popularity of cruising in Asia with the deployment of a second Costa ship in China and the launch of a new Princess Cruises program for the Japanese market.
“Looking forward, we remain committed to a measured pace of newbuilds and achieving a strategic balance of supply and demand in established markets,” Arison said. “Our lower capital commitments should result in significant excess free cash flow in the coming years, which we intend to return to shareholders.”
Since June, fleetwide booking volumes and pricing trends for the remainder of 2012 and first half of 2013 have continued to strengthen. For the last six weeks, booking volumes, excluding Costa, have increased 9 percent versus the prior year at prices in line with last year’s levels. Over the same period, booking volumes for Costa have also increased 9 percent, although at lower prices. For the remainder of the year and first half of 2013, cumulative advance bookings excluding Costa are still behind the prior year at slightly lower prices. For Costa, advance bookings have shown “considerable improvement” but are still 5 occupancy points behind the prior year at lower prices.
“The pace of booking volumes remains healthy, enabling us to continue to catch up on occupancy levels, while pricing has gradually improved,” Arison said. “Both of these trends leave us well positioned for a recovery in cruise ticket prices beginning in the second quarter of 2013.”
The company forecasts full-year 2012 earnings per share to be in the range of $1.83 to $1.87, in line with the midpoint of the June guidance range of $1.80 to $1.90 per share. And the company expects earnings for the fourth quarter of 2012 to be in the range of 7 to 11 cents per share versus 28 cents per share in 2011.