Carnival reduces losses -hits record bookings

2023-03-30T20:52:19+00:00 March 30th, 2023|Finance|

Carnival Corp reported a GAAP net loss of $693 mill, or $(0.55) diluted EPS, and adjusted net loss of $690 mill, or $(0.55) adjusted EPS, for the first quarter of this year.

This was better than December’s guidance range of a $750 to $850 mill net loss, Carnival claimed.

Adjusted EBITDA for 1Q23 was $382 mill, better than the December guidance range of $250 mill to $350 mill, despite a $31 mill impact from fuel price and currency rates since the last guidance.

Revenue in the first quarter was $4.4 bill, which represented 95% of 2019 levels. This was better by 15% than 4Q22, which was 80% of 2019 levels.

Carnival said that it had experienced the highest quarterly booking volumes in its history, breaking records for both the North America and Australia (NAA) and Europe segments.

Total customer deposits placed were a first quarter record of $5.7 bill (as of 28th February, 2023), surpassing the previous first quarter record of $4.9 bill on 28th February, 2019 by 16%.

Cash from operations turned positive in 1Q23. The company expects continued growth in cash from operations to be the driver for paying down debt over time, Carnival said.

Liquidity at the end of 1Q23 amounted to $8.1 bill.

Carnival Corp’s CEO, Josh Weinstein (pictured), commented; “In the first quarter, we outperformed our guidance on all measures. We achieved record first quarter net per diems, exceeding the high end of our guidance, driven by improving ticket prices and sustained growth in on board revenue, while delivering an additional seven points of occupancy on higher capacity compared to the prior quarter.

“We are enjoying a phenomenal wave season, achieving our highest ever quarterly booking volumes and breaking records in both North America and Europe. Our strong performance has extended into March and we expect this favourable trend to continue based on the success of our efforts to drive demand.

“We remain focused on executing our overarching strategy of driving net yield growth, while maintaining our industry-leading cost base.

“With adjusted free cash flow for the year expected to be positive, our revolver renewal behind us, more committed export credit financings in hand, a reduced capex profile going forward and over $8 bill of liquidity, we believe we are well positioned to pay down near term debt maturities from excess liquidity and therefore have no intention to sell equity (except in connection with our advantageous and non-dilutive stock swap programme),” he said.

Occupancy in 1Q23 was 91%, higher than the December guidance, increasing by 7%, compared to the previous quarter, on higher capacity.

Cruise costs per available lower berth day (ALBD) increased by 3.3%, compared to 1Q19.

In constant currency, adjusted cruise costs, excluding fuel per ALBD, increased 5.9%, compared to 1Q19, continuing its sequential quarterly improvement and better than the December guidance of up to 6.5% – 7.5%.

However, costs were higher, compared to 2019, as a result of higher advertising investments to drive 2023 revenue, as well as partially mitigating the impacts of a high inflation environment.

Weinstein added; “We are well booked for the remainder of the year at higher prices (normalised for FCCs), which coupled with continued strength in on board revenue, supports our improving outlook for the remainder of the year. We expect the extension of booking lead times, combined with our investment in advertising, to position us even better in 2024 and beyond.”

The booking window has continued to return to historical patterns, providing further confidence in the continued strengthening of the demand environment and facilitating improving revenue yields over time. The company’s NAA segment’s booking curve mirrored peak 2019 levels, while the company’s Europe segment continued to see an extension of its booking curve, which is over 80% recovered, compared to 2019 levels.

Carnival’s cumulative advanced booked position for the remainder of this year is at higher ticket prices in constant currency, normalised for future cruise credits (FCCs), compared to strong 2019 pricing and a booked occupancy position that is solidly in the higher end of the historical range.

For the full year, the company said that it expects:

  • adjusted EBITDA of $3.9 bill – $4.1 bill
    • includes about $0.5 bill unfavourable impact from fuel price and currency, compared to 2019
    • sequential improvement in each quarter in adjusted EBITDA per ALBD, compared to 2019, driven by closing the gap in occupancy to 2019 levels, while achieving net per diems above 2019 levels
  • occupancy of 100% or higher, returning to historical levels this summer
  • adjusted cruise costs excluding fuel per ALBD (in constant currency) one point higher than December guidance, reflecting an expected increase in occupancy levels and strategic decisions taken during the quarter.

For 2Q23, the company forecasts:

  • adjusted EBITDA of $600 mill – $700 mill, a significant improvement, compared to 1Q23
  • occupancy of 98% or higher
    • a seven percentage point gap (or less) from 2019
    • an improvement from a 13% point gap for 1Q23, compared to 2019
  • net per diems of 2.5% to 3.5% (in constant currency) above 2019 levels
    • net per diems reflect the changing brand mix and cabin mix, compared to the first quarter
    • net yields of $160, higher than 1Q23‘s $149, which reflects continuing net yield improvement
  • adjusted cruise costs excluding fuel per ALBD higher than 1Q23, reflecting an expected increase in occupancy levels and higher drydock related expenses.

Carnival Corp’s CFO, David Bernstein, added; “We believe our debt balance has peaked this quarter and will reduce over time based on our ample liquidity position of $8.1 bill and the expected cash flow strength of our business.”

Cash from operations turned positive in 1Q23. The company expects continued growth in cash from operations to be the driver for paying down debt over time.

During the quarter, Carnival received two new export credit facilities, bringing the total committed financing related to ship deliveries, scheduled to enter service through 2025 to $3.2 bill.

These export credit facilities provide the company with the ability to finance its newbuilding programme at preferential interest rates.

The company also said that it continued its efforts to pro-actively address its debt profile. It successfully arranged a new $2.1 bill multi-currency revolving credit facility, which will replace the existing $2.9 bill multi-currency revolving credit facility upon its maturity in August, 2024.

This new revolver has an initial term of one year, commencing in August, 2024, with two one-year extension options. It also contains an accordion feature, allowing for additional commitments up to an aggregate of $2.9 bill.

During 1Q23, the company invested $1.1 bill in capital expenditures, repaid $0.7 bill of debt principal and incurred $0.5 bill of interest expense, net.

Carnival also continued its focus on innovation in its commitment to de-carbonisation by evaluating and piloting the use of alternative fuels and biofuels. During the quarter, Costa Cruises and AIDA Cruises announced a partnership with a methanol producer, which aims to enhance the supply of and necessary infrastructure for methanol.

Suitably sourced green methanol is considered a lower carbon fuel, which virtually eliminates particulate matter and sulphur oxides.

This partnership builds on the company’s progress throughout 2022, which included the completion of two successful pilots using a blend of marine biofuel made from 100% sustainable raw materials.

These biofuels can be used in existing ship engines without modifications to the machinery or fuel infrastructure, including on ships already in service.

On 1st February, 2023, Laura Weil became the Audit Committees’ Chair. She has extensive financial, strategic information technology and operating skills, which make her highly qualified to lead the committees.

She will succeed Richard Glasier, who will not seek re-election to the Boards at the 2023 Annual Meetings of Shareholders and will retire from the Boards with effect from the conclusion of the 2023 Annual Meetings.

As of April, 2023, the company’s Boards will be comprised of 11 members, nine of whom are independent directors, four are female and one of whom is ethnically diverse.