Carnival’s EBITDA turns positive

2022-10-13T17:45:24+00:00 October 13th, 2022|Finance|

Carnival Corp reported a US GAAP net loss of $770 mill and an adjusted net loss of $688 mill for the third quarter of 2022.

However, adjusted EBITDA turned positive for the first time since the resumption of cruising at over $300 mill, marking a significant milestone, Carnival claimed.

Revenue increased by nearly 80% in 3Q22, compared to the previous quarter, reflecting a continued sequential improvement. Occupancy in the third quarter of 2022 increased by 15% from the previous quarter.

Since the announcement of the company’s relaxed protocols in mid-August, aligning Carnival towards land-based vacation alternatives, booking volumes for all future sailings were considerably higher than the strong 2019 levels.

The quarter ended with $7.4 bill of liquidity, including cash and borrowings available under the company’s revolving credit facility, the group said.

Carnival Corp’s CEO, Josh Weinstein (pictured), commented, “During our third quarter, our business continued its positive trajectory, achieving over $300 mill of adjusted EBITDA and reaching nearly 90% occupancy on our August sailings. We are continuing to close the gap to 2019, as we progress through the year, building occupancy on higher capacity and lower unit costs.

“Since announcing the relaxation of our protocols, we have seen a meaningful improvement in booking volumes and are now running considerably ahead of strong 2019 levels. We expect to further capitalise on this momentum with renewed efforts to generate demand. We are focused on delivering significant revenue growth over the long-term, while taking advantage of near-term tactics to quickly capture price and bookings in the interim.

“With a transformed fleet, an unmatched portfolio of well recognised brands, unparalleled scale in an under-penetrated industry and an incredibly talented global team, we have the ability to drive durable revenue growth through pricing improvements over time. We believe this will provide significant free cash flow and accelerate our return to strong profitability and investment grade credit ratings,” he concluded.

Revenue increased by nearly 80% in 3Q22, compared to the previous quarter, reflecting continued sequential improvement. For the cruise segments, revenue per passenger cruise day (PCD) for 3Q22 decreased compared to a strong 2019.

However, on board and other revenue per PCD for 3Q22 increased significantly, compared to 2019.

PCDs for 3Q22 were 17.7 mill, representing a 55% increase from the second quarter. Occupancy increased 15% from 2Q22.

Available lower berth days (ALBD) for 3Q22 were 21 mill, which represents 92% of total fleet capacity, an increase from 74% in the previous quarter.

Weinstein added, “With our return to guest cruise operations essentially complete, we are now relentlessly focused on driving top line growth and returning to strong profitability. We believe the strategic changes we have already made to our fleet resulting in a younger and more efficient fleet, coupled with our recent portfolio optimisation efforts, including COSTA® by CARNIVAL®, will provide strong tailwinds along our path to profitability.”

Carnival said that it expected eight of its nine brands to have their entire fleet back in operation by the end of 4Q22.

Given Costa Cruises’ significant presence in Asia, particularly China, which remains closed to cruising, the brand continued to evaluate deployment options and fleet optimisation alternatives beyond the previously announced transfers of ’Costa Luminosa’ to Carnival Cruise Line, and ’Costa Venezia’ and ’Costa Firenze’ to the COSTA® by CARNIVAL® concept.

Given the seasonality of its business, the company expected a net loss and breakeven to a slightly negative adjusted EBITDA for 4Q22.

Having achieved over $300 mill adjusted EBITDA in 3Q22, the company anticipated positive adjusted EBITDA for the second half of 2022, despite the seasonality of its business and the increasing investment in advertising to drive yields in 2023.

In addition, on a year-on-year basis, the company expected improvement in adjusted EBITDA and occupancy, with the latter returning to historical levels during 2023.

During 3Q22, Carnival completed a $1.15 bill public equity offering of its common stock. It expected to use the net proceeds for general corporate purposes, which could include addressing the 2023 debt maturities.

In addition, the company invested $0.5 bill in capital expenditures, repaid $0.4 bill of debt principal and incurred $0.4 bill of interest expense, net during the quarter, ending the third quarter with $7.4 bill of liquidity, including cash and borrowings available under the revolving credit facility.

Turning to sustainability, Carnival’s Chief Maritime Officer, William Burke, explained, “We recently completed successful pilots using biofuels, which demonstrate continued innovation in our commitment to de-carbonisation. In addition, we are working aggressively toward our 2030 carbon reduction goals through the technology upgrades currently being rolled out, investing in port and destination projects and even more focus on itinerary optimisation across the portfolio, while realising the benefit of our fleet optimisation efforts, which combine to drive down our carbon footprint, fuel consumption and cost.

“This reinforces our commitment to maintaining excellence in compliance, protecting the environment and the health, safety and well-being of our guests, employees and the communities we touch and serve,” he said.

In August, 2022, the company announced the global rollout of ‘service power packages’, a comprehensive set of technology upgrades, which will be implemented over the next several years across part of the fleet.

These upgrades include the following elements designed to reduce both fuel usage and greenhouse gas emissions while also contributing to cost savings:

  • Comprehensive upgrades to each ship’s hotel HVAC systems.
  • Technical systems upgrades on each ship.
  • State-of-the-art LED lighting systems.
  • Remote monitoring and maintenance of energy usage and performance.

The package upgrades are part of the company’s ongoing energy efficiency investment programme, in which Carnival has invested over $350 mill in energy efficiency improvements since 2016.

Upon completion, these upgrades are expected to generate around $150 mill in annual fuel cost savings by delivering an average of 5-10% fuel savings per ship.

These investments, along with the company’s fleet optimisation and recently launched itinerary reviews, are expected to drive a 10% reduction in fuel consumption per ALBD in 2023, along with a 9% reduction in carbon emissions per ALBD on an annualised basis, both compared to 2019.

This multi-year programme will also contribute to carbon emission reductions in 2024 and beyond, ultimately advancing the company’s 2030 sustainability goals.