Carnival’s losses continue

2022-03-25T14:53:43+00:00 March 25th, 2022|Finance|

Carnival Corp has reported a US GAAP net loss of $1.9 bill and adjusted net loss of the same amount for the first quarter of 2022.

At the end of this quarter, Carnival had $7.2 bill of liquidity, including cash, short-term investments and borrowings available under its revolving credit facility.

For the cruise segments, revenue per passenger cruise day (PCD) increased by about 7.5%, compared to a strong 2019. This increase was driven by exceptionally strong on board and other revenue, Carnival said.

As of 22nd March, 2022, 75% of the company’s capacity had resumed cruise operations with guests. Carnival also said that it expects to have each brand’s full fleet back in operation for its respective summer season where historically the largest share of its operating income is generated.

The company also believed that its monthly adjusted EBITDA will turn positive at the beginning of the summer season.

Since the middle of January, Carnival said that it had seen an improving trend in weekly booking volumes for future sailings. Recent weekly booking volumes have been higher than at any point since the restart of guest cruise operations.

Three more ships are expected to leave the fleet this year in connection with the ongoing fleet optimisation strategy. In total, this represents the removal of 22 smaller-less efficient ships since the beginning of the pause in guest cruise operations.

In addition, during the period, Carnival’s President and CEO, Arnold Donald (pictured), was appointed Chief Climate Officer.

During 1Q22, as a result of the Omicron variant, Carnival experienced an impact on bookings for its near-term sailings, including higher cancellations resulting from an increase in pre-travel positive test results, challenges in the availability of timely pre-travel tests and the disruption Omicron caused on society during this period.

As a result occupancy in 1Q22 was 54% – a 20% increase in guests carried over the previous quarter.

Available lower berth days (ALBD) for the quarter were 13 mill, which represents 60% of total fleet capacity, an increase from 47% registered in 4Q21.

Donald commented, “Despite the impact of Omicron, guests carried grew by nearly 20% in the first quarter, compared to the prior quarter, while simultaneously increasing revenue per passenger cruise day and driving an improvement in adjusted EBITDA.

“We expect monthly adjusted EBITDA to turn positive by the beginning of our summer season as we build occupancy and return more ships to service.

“We believe we have positioned the company well to withstand volatility on our path to profitability and have been working hard to resume operations as a stronger and more sustainable operating company, to maximise cash generation and to deliver double digit returns on invested capital over time,” he said.

Carnival Corp CFO, David Bernstein, said, “We ended the first quarter of 2022 with $7.2 bill of liquidity. Looking forward, we believe we remain well positioned given our liquidity and the continued improvement expected in adjusted EBITDA, along with the expected build in customer deposits, as we progress toward resuming full fleet operations.”

Donald added; “Since resuming guest cruise operations, we delivered more than 2.2 mill exceptional vacations, while achieving historically high guest satisfaction scores. With 75% of our capacity having resumed guest cruise operations, we are well on our way back to full cruise operations and we are planning to return the balance of the fleet by our summer seasons.

“Achieving these operational milestones while facing headwinds, including Delta and Omicron variants and changing regulations and protocols —particularly at our scale— makes the efforts of our team, ship and shore, all the more impressive.

“In addition, we furthered our fleet optimisation efforts by taking delivery of three larger-more efficient ships during the quarter, ’Costa Toscana’ and ‘AIDAcosma’, the company’s fifth and sixth ships powered by LNG and ‘Discovery Princess’. We also announced the removal of another three smaller-less efficient ships, bringing the total to 22 ships, significantly reducing our rate of capacity growth.

“Upon returning to full operations, nearly 25% of our capacity will consist of newly delivered ships, which we believe will expedite our return to profitability and improve our return on invested capital,” he said.

The ongoing resumption of the company’s guest cruise operations and the increased uncertainty given the current invasion of Ukraine, including its effect on the price of fuel, are collectively having a material impact on the business, including the company’s liquidity, financial position and results of operations.

Carnival said that it expected a net loss for 2Q22 on both a US GAAP and adjusted basis turning into a profit by 3Q22. However, for the full year 2022, the company forecast a net loss.