Carnival reduces cash burn

2021-04-13T20:47:17+00:00 April 13th, 2021|Finance|

Carnival Corp has reported a US GAAP and an adjusted net loss of $2 bill each for the first quarter of this year.

At the end of the quarter, Carnival said it had $11.5 bill in cash and short term investments.

The cash burn rate was better than expected as the company identified and implemented opportunities to optimise its monthly spend, it claimed.

Booking volumes for all future cruises during 1Q21 were around 90% higher than booking volumes during  4Q20.

Cumulative advanced bookings for full year 2022 were ahead of a very strong 2019, despite minimal advertising or marketing. In addition, six of the company’s nine brands were expected to resume limited guest cruise operations by this summer.

Carnival Corp President and CEO, Arnold Donald, commented, “We are focused on resuming operations as quickly as practical, while at the same time demonstrating prudent stewardship of capital and doing so in a way that serves the best interests of public health. Our highest responsibility and therefore our top priority is always compliance, environmental protection and the health, safety and well-being of everyone.

“Our portfolio of brands have clearly been an asset as we resume operations this summer with nine ships across six of our brands.

“Throughout the pause, we have been positioning Carnival Corporation to return to serving guests an operationally stronger company than we were before. With an exciting roster of six new, more efficient ships by December and with lower capacity from the exit of 19 less efficient ships, we expect to capitalise on pent-up demand and achieve significant cost improvement from the greater efficiency of our fleet, along with ongoing streamlining of shoreside operations,” he explained.

Total customer deposits as of 28th February, 2021 and 30th November, 2020 were $2.2 bill, the majority of which were future cruise credits.

During the quarter, customer deposits on new bookings essentially offset the impact of refunds provided. As at the end of February, 2021, the current portion of customer deposits was $1.8 bill, of which $0.7 bill related to bookings for the remainder of 2021.

The company claimed that it is uniquely positioned for a phased resumption in cruise travel given its multiple brands, which can each be restarted independently and tailored to the environment of their respective source market.

AIDA Cruises resumed guest cruise operations in late March sailing in the Canary Islands. Costa Cruises expects to resume operations in May sailing to Italian ports. P&O Cruises (UK), Cunard and Princess Cruises will each offer a series of cruises this summer sailing around UK coastal waters with P&O Cruises (UK) kicking off the season in June, followed by Cunard and Princess Cruises in July. Seabourn also expects to resume guest cruise operations this summer sailing from Greece.

In addition, this summer Holland America Line and Princess Cruises expect to offer land-based vacation options for travellers to experience Alaska through a combination of tours, lodging and sightseeing.

Initial cruises are taking place with adjusted passenger capacity and enhanced health protocols developed with government and health authorities, and guidance from the company’s roster of medical and scientific experts.

The company said it had been working with a number of world-leading public health, epidemiological and policy experts to support its ongoing efforts with enhanced health and safety protocols to help protect against and mitigate the impact of COVID-19 during cruise vacations.

Carnival’s brands have a comprehensive set of health and hygiene protocols that facilitate a safe and healthy return to cruise vacations. These enhanced protocols are modelled on shoreside health and mitigation guidelines as provided by each brand’s respective country, and approved by all relevant regulatory authorities.

Protocols will be updated based on evolving scientific and medical knowledge related to mitigation strategies. In addition to the jurisdictions associated with the restart plans noted above, the company said that it continues to work closely with governments and health authorities in other parts of the world to ensure that its health and safety protocols will also comply with the requirements of each location.

Carnival Corp’s CFO, David Bernstein, added, “We ended the first quarter with $11.5 bill in cash and short-term investments. At this time, we believe we have enough liquidity to get us back to full operations and we will be pursuing refinancing opportunities to reduce interest expense and extend maturities.

“We have successfully identified and implemented actions to optimise our monthly cash burn rate and we will continue to do so,” he said.

Carnival’s monthly average cash burn rate for 1Q21 was $500 mill, which was claimed to be better than expected, primarily due to the timing of capital expenditures.

The company said it expected the monthly average cash burn rate for the first half of 2021 to be about $550 mill, which is also better than previously expected.

This was due to the company’s efforts to optimise its monthly spend despite higher restart related spend. As the company continues to resume guest cruise operations, it expects to incur incremental spend relating to bringing ships out of pause status, returning crew members to its ships and implementing enhanced health and safety protocols.

Due to the pause in guest operations, the company has taken significant actions to preserve cash and secure additional financing to increase its liquidity. Since March, 2020, the company has raised $23.6 bill through a series of transactions.

During the remainder of fiscal 2021, the company expects to refinance debt at lower interest rates and extend maturities.

Despite the planned startups, a net loss on both a US GAAP and adjusted basis for 2Q21 and full year ending 30th November, 2021, was forecast.