Carnival Corp has suffered a US GAAP net loss of $4.4 bill, or minus $6.07 diluted EPS, for the second quarter of 2020.
This figure includes $2 bill of non-cash impairment charges.
The 2Q20 adjusted net loss was $2.4 bill, or minus $3.30 adjusted EPS.
Total revenues for the second quarter were $0.7 bill, compared with $4.8 bill received in 2Q19.
Carnival explained that the company’s guest cruise operations were stopped for a majority of the second quarter. In addition, it was unable to predict when it will return to normal operations. As a result, the Group was unable to provide an earnings forecast.
The cessation of guest operations continued to have material negative impacts on all aspects of the company’s business. The longer this pause continues, the greater the impact on the company’s liquidity and financial position, Carnival warned.
The company did say that it expected a net loss on both a US GAAP and adjusted basis for the second half of 2020.
Available liquidity at the end of 2Q20 was $7.6 bill and the company expected to further enhance liquidity, including through refinancing scheduled debt maturities. In addition, the company has $8.8 bill of committed export credit facilities that were available to fund ship deliveries originally planned through 2023.
Total customer deposits balance as at 31st May, 2020 was $2.9 bill, which included $475 mill related to cruises during the second half of this year.
The company also said that it expected to resume guest operations, after collaboration with both government and health authorities, in a phased manner, with specific ships and brands returning to service over time.
Carnival anticipated that initial sailings would be from a select number of easily accessible homeports.
The Group also said that future capacity would be moderated by the phased re-entry of its ships, the removal of capacity from its fleet and delays in new ship deliveries.
In connection with its capacity optimisation strategy, the company intends to accelerate the removal of ships in fiscal 2020, which were previously expected to be sold over the ensuing years.
The company claimed that it already had preliminary agreements in place for the disposal of six ships, which were expected to leave the fleet in the next 90 days and it was also working toward additional agreements.
In preparation for the resumption of cruising, the company was consulting and working in close co-operation with various medical policy experts and public health authorities to develop enhanced procedures and protocols for health and safety on board its ships.
Carnival said that it appreciated the working relationship with the health authorities of federal states and local port authorities in Germany, as well as the Italian Coast Guard, Italian Ministry of Transportation, Italian Ministry of Health and others around the world.
A comprehensive restart protocol may include areas, such as medical care, screening, testing, mitigation and sanitisation addressing arrival and departure at cruise terminals, the boarding and disembarkation process, on board experiences and shore excursions.
For the six weeks ending 31st May, 2020, around two-thirds of 2021 bookings received were new reservations. The remaining 2021 booking volumes resulted from guests applying their credits to specific future cruises.
Carnival estimated that its ongoing ship operating and administrative expenses will be in the region of $250 mill per month once all ships are have stopped operating. The company said it was seeking ways to further reduce this monthly requirement.
It said that it had already taken significant action to reduce operating expenses during the pause in guest operations – these include:
- While maintaining safety, environmental protection and compliance, the company significantly reduced ship operating expenses, including crew payroll, food, fuel, insurance and port charges by transitioning ships into paused status, either at anchor or in port and staffed at a safe manning level
- Currently, 62 of the company’s ships are in their final expected pause location. The company expects substantially all of its ships to reach their full pause status during the third quarter
- Significantly reduced marketing and selling expenses
- Implemented a combination of layoffs, furloughs, reduced work weeks and salary and benefit reductions across the company, including senior management
- Instituted a hiring freeze across the organisation, significantly reduced consultant and contractor roles.
Carnival said that it had reduced capital expenditures and estimated a further $300 mill of non-newbuilding capital expenses during the second half of 2020, which largely consists of previously committed expenditures.
Originally, Carnival had four ships scheduled to be delivered between May and October, this year. The company said that COVID-19 had impacted shipyard operations, which would result in ship delivery delays this year and was working with the shipyards on revised timings.
Carnival said it had committed future financing, comprised of ship export credit facilities, associated with the newbuildings.
Turning to liquidity improvement, Carnival has taken the following actions:
- Completed offerings of $6.6 bill through the issuance of first-priority senior secured notes, senior convertible notes and Carnival Corp common stock.
- Fully drew down its $3 bill multi-currency revolving credit facility.
- Qualified for a US government commercial paper programme providing over $700 mill of liquidity.
- Early settled outstanding derivatives, receiving proceeds of $220 mill.
- Extended a $166 mill euro-denominated bank loan, originally maturing in 2020, to March, 2021.
- Some export credit agencies have offered 12-month debt amortisation and a financial covenant holiday. These amendments that have been finalised to date will defer $300 mill of principal repayments otherwise due through May, 2021 with repayments made over the following four years. Carnival has also obtained financial covenant waivers for these loans for an initial term through March, 2021 and waivers of the interest coverage financial covenant for certain of its bank loans through November, 2021. It was working to arrange additional financial covenant waivers and additional debt holiday agreements deferring principal repayments of around $300 mill through March, 2021.
- Suspended the payment of dividends on, and the repurchase of, Carnival Corp common stock and Carnival plc ordinary shares.
- The company is also working on potential sales of non-ship assets.
During the cessation of cruising the monthly average cash burn rate for 2H20 was estimated at about $650 mill. This includes ongoing ship operating and administrative expenses, committed capital expenditures (net of committed export credit facilities) and interest expense, but excludes changes in customer deposits and scheduled debt maturities.
In addition to the refinancing described above and the in-process debt holiday arrangements, Carnival also expected to refinance around $2.4 bill of debt maturities due over the next 12 months, half of which will mature in the second half of this year.
