Royal Caribbean Reports $3.6 Million Second Quarter Loss on Europe Woes
Royal Caribbean Cruises Ltd. on July 26 reported a net loss of $3.6 million, or 2 cents per share for the second quarter, compared to a profit of $93.5 million, or 43 cents per share, in the same period last year.
Since the company’s April guidance, the strengthening of the U.S. dollar and decreases in fuel pricing have essentially offset one another, the company said. Business demand remains solid in the Caribbean and Asia, but larger-than-anticipated discounting was required in Europe, RCCL said. The company offset more than half of the yield declines through additional spending reductions.
In the third quarter, the company forecast that net yields would decrease between 1 and 2 percent on a constant-currency basis and approximately 5 percent on an as-reported basis. Earnings per share are expected to be within a range of $1.40 to $1.50.
For the full year 2012, net yields are expected to increase 2 to 3 percent on a constant-currency basis and be between flat and up 1 percent on an as-reported basis. Earnings per share are expected to be within a range of $1.70 to $1.80.
“The steady drumbeat of negative news emanating out of Europe is certainly having an impact,” said Richard D. Fain, chairman and CEO. “As a result, we are seeing pluses and minuses in the different geographical markets. North America is holding up reasonably well; Asia is a big plus; but Europe is a pretty consistent minus. Overall we have seen about a 100 basis point drop in our yield projections, but we expect to offset over half of this decline with lower spending.”
The second-quarter 2012 results included a 5 cent per share mark-to-market loss on the company’s fuel option portfolio. As previously reported, RCCL said the impact of the Costa Concordia tragedy in Italy seems to be particularly meaningful in the second and third quarters.
The company reported that overall, booking trends have continued to normalize and are now running at levels comparable to prior year’s activity. Larger-than-expected discounting was required for the European season.
“It is hard to distinguish how much of the pressure in Europe is connected to the Costa Concordia incident and how much is due to the economic roller coaster,” said Brian J. Rice, executive vice president and chief financial officer. “Our sense is that the former is no longer having a major impact on our bookings especially among experienced guests. However, the timing of the incident left a big gap during our peak booking period and filling that gap is disrupting our normal booking patterns.”
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