Carnival Corp reports record year

2018-01-04T10:21:32+00:00 January 4th, 2018|Finance|

Carnival Corp announced a US GAAP net income for the full year 2017 of $2.6 bill, or $3.59 diluted EPS, compared to $2.8 bill, or $3.72 diluted EPS, for the prior year.

Adjusted net income of $2.8 billion, or $3.82 adjusted EPS for the year, was higher than adjusted net income of $2.6 bill, or $3.45 adjusted EPS, for 2016.

Adjusted net income excluded unrealised gains on fuel derivatives of $227 mill and previously reported impairments and other net charges of $390 mill for 2017. For 2016, this excluded unrealised gains on fuel derivatives of $236 mill and other net charges of $37 mill.

Revenues for 2017 were $17.5 bill, $1.1 bill higher than the $16.4 bill recorded in the previous year.
Carnival Corp’s President and CEO, Arnold Donald (pictured), commented, “We exceeded the high end of our original full year 2017 guidance by $0.22 per share, achieving record cash from operations of $5.3 bill and another adjusted earnings per share record despite a significant drag from fuel and currency.

“Our full year performance was led by over 4.5% growth in ticket prices while overcoming a variety of headwinds, affirming that our core strategy, which is anchored in delivering exceptional guest experiences, driving demand through marketing programmes to increase cruise consideration, and introducing new more efficient ships through measured capacity growth all while leveraging our scale, can deliver consistent earnings improvements,” he said.

Key information for the fourth quarter 2017 compared to the previous year:

US GAAP net income for 4Q17 of $546 mill, or $0.76 diluted EPS, compared to $609 mill or $0.83 diluted EPS, for 4Q16. On an adjusted basis, 4Q17 net income of $452 mill, or $0.63 EPS, compared to net income of $491 mill, or $0.67 EPS, for 4Q16. Adjusted net income excludes unrealised gains and losses on fuel derivatives and other net charges, totalling $94 mill in net gains for 4Q17 and $118 mill of net gains for 4Q16.
Gross revenue yields (revenue per available lower berth day or ‘ALBD’) increased 6.8%. In constant currency, net revenue yields increased 4.2% for 4Q17, better than September guidance of up 1.5 to 2.5%.
Gross cruise costs including fuel per ALBD increased 9.7%. In constant currency, net cruise costs excluding fuel per ALBD increased 6.1%, in line with September guidance of up 6 to 7%.
Changes in fuel prices (including realised fuel derivatives) and currency exchange rates decreased earnings by $0.03 per share.
Voyage disruptions due to hurricanes reduced fourth quarter earnings by approximately $0.11 per share.

Highlights during 4Q17 included the official start of construction on AIDA Cruises’ ‘AIDAnova’, due to enter service in December, 2018, the first of seven next-generation ships that will be fully powered by LNG, as well as an agreement reached between Carnival Cruise Line and Shell, which will supply fuel for the brand’s two LNG-powered ships, the first in North America when they enter service in 2020 and 2022.

Also during the quarter, the company announced an agreement with Fincantieri for the construction of a new ship for the Cunard brand, to be delivered in 2022. Several new innovations under the company’s patented OCEAN experience platform launched including Ocean Medallion, PlayOcean a mobile gaming portfolio, OceanView, which is the world’s first digital streaming travel channel for land and sea, and MedallionNet, a new easy-to-access Wi-Fi that features exceptional speeds, bandwidth and service consistency.

Other milestones included Seabourn being named ‘Best Small-Ship Cruise Line’ by Condè Nast Traveler magazine and the announcement of a restaurant and microbrewery in partnership with celebrity chef Guy Fieri to be featured on Carnival Cruise Line’s ‘Carnival Horizon’ from April, 2018.

As at 20th December, cumulative advance bookings for 2018 were ahead of 2017’s at higher prices. Since November, booking volumes for 2018 have been running well ahead of 2017 at higher prices.

Donald commented, “Despite booking disruptions from this year’s multiple hurricanes, we are still heading into 2018 with a stronger base of business and higher prices than last year. We have numerous efforts underway to keep the momentum going in 2018 and beyond, from our innovative approaches to increase consideration for cruising, including our recently announced partnership with Univision, to the further roll-out of our state-of-the-art revenue management system.

“In 2018, we also look forward to the delivery of four new cutting-edge ships, ‘Carnival Horizon’, ‘Seabourn Ovation’, ‘AIDAnova’, and ‘Nieuw Statendam’ to further our strategic fleet enhancement programme,” he said.

Based on current booking trends, the company expects full year 2018 net revenue yields in constant currency to be up around 2.5%, compared to 2017. The company expects full year net cruise costs excluding fuel per ALBD in constant currency to be up around 1%, compared to the previous year.

As a result of higher fuel prices, forecast fuel costs for 2018 are expected to increase about $117 mill, compared to those of 2017, net of realised fuel derivatives, reducing earnings by $0.16 per share. This is partially offset by favourable movements in currency exchange rates, which are forecast to increase earnings by $0.08 per share.

Taking the above factors into consideration, the company expects full year 2018 adjusted earnings per share to be in the range of $4 to $4.30, compared to 2017 adjusted earnings per share of $3.82.

Donald added, “We remain on track to achieve double digit return on invested capital in 2018. We are committed to the continued distribution of cash to shareholders through increasing dividends, currently totalling $1.3 bill annually, and ongoing share repurchases, which have exceeded $3 bill since late 2015.”

Meanwhile, 1Q18 constant currency net revenue yields are expected to be up around 1.5 to 2.5%, compared to the previous year. Net cruise costs excluding fuel per ALBD in constant currency for 1Q18 are expected to increase by about 2-3%, compared to 1Q17. Changes in fuel prices (including realised fuel derivatives) and changes in currency exchange rates compared to 1Q17 are expected to decrease earnings by $0.02 per share.

Based on the above factors, the company expects adjusted earnings per share for 1Q18 to be in the range of $0.37 to $0.41 versus 2017 adjusted earnings per share of $0.38.