NCLH returns to profit

2024-03-01T19:07:14+00:00 March 1st, 2024|Finance|

Norwegian Cruise Line Holdings (NCLH) generated total revenue of $8.5 bill last year, a 32% increase compared to the same period in 2019.

A GAAP net income of $166.2 mill, or EPS of $0.39, saw NCLH return to a full year profit for the first time since 2019.

The Group achieved adjusted EBITDA of $1.861 bill, which was  in line with guidance of $1.860 bill and Adjusted EPS of $0.70, which is inclusive of a $0.07 foreign currency negative impact.

Full year performance was driven by solid revenue growth and continued focus on cost reduction and efficiencies, NCLH said.

The company’s ongoing margin enhancement initiative drove an improvement in operating costs.

Gross cruise costs per capacity day were around $301 for the year. Adjusted net cruise costs, excluding fuel per capacity day were about $154 – 21% less than the same period in 2022.

This represented four quarters of continuous year-over-year improvement on this metric, NCLH said.

Occupancy was 102.9% for the year, in line with guidance of 102.6%, and total revenue per passenger cruise day increased around 17%, or 18% in constant currency, compared to the same period in 2019.

NCLH also announced a revamped climate action strategy, including interim greenhouse gas intensity reduction targets of 10% by 2026 and 25% by 2030, compared to a 2019 baseline with intensity measured on a per capacity day basis.

During the year, the Group took delivery of three ships, Oceania Cruises’ ‘Vista’, NCL’s ‘Norwegian Viva’ and Regent’s ‘Seven Seas Grandeur’, the most deliveries in a single year in the company’s history.

This year, NCLH expects to refinance its $650 mill backstop commitment from a secured to unsecured commitment. In addition, as part of the refinancing, repayment of the $250 mill 9.75% senior secured notes, due 2028, is expected.

Exceptional demand continued at NCL, with bookings and pricing at higher levels than 2023 for all four quarters of 2024. Oceania Cruises and Regent Seven Seas Cruises also continued to see strong demand across all geographies with the exception of redeployed itineraries, due to cancellations in the Middle East and Red Sea.

NCLH’s net yield is expected to increase about 5.5% as-reported and about 5.4%. in constant currency, versus 2023,

In 2024, adjusted net cruise costs, excluding fuel per capacity day, is expected to be $159, increasing 3.4% in constant currency, which includes about 325 basis points impact of increased drydocking days and related costs in the year.

Excluding this, adjusted net cruise cost, excluding fuel per capacity day would be essentially flat year-over-year.

Adjusted EBITDA is expected to be around $2.2 bill, adjusted net income about $635 mill, and adjusted EPS is forecast to be around $1.23, an increase of 76% over 2023 results.

This adjusted EPS takes into consideration circa 516 mill dilutive shares, reflecting the expected accounting treatment of NCLH’s exchangeable notes.

“Norwegian Cruise Line Holding experienced a momentous year of growth and achievement in 2023. We successfully took delivery of three new ships, one for each of our brands, representing the most deliveries in a single year in our company’s 57-year history.

“This important milestone showcases our dedication to innovation and commitment to providing exceptional vacation experiences for our guests,” said President and CEO, Harry Sommer.

“Looking ahead, we are determined to capitalise on our recent achievements and take advantage of the positive momentum and strong demand for cruise, which resulted in turning the year at all-time highs in both our booked position and pricing.

“Our team is looking forward to showcasing our world class fleet, delivering exceptional experiences, and surpassing the expectations of the guests we will welcome on board in 2024 and beyond,” he continued.

The company said that it continued to experience healthy consumer demand and is at an all-time high booked position and pricing reflective of some of the best booking weeks in the company’s history beginning with Black Friday and Cyber Monday.

In addition, on board revenue per passenger cruise day remained robust, up 20% in the quarter, compared to 2019, with broad-based strength across all revenue streams.

The company’s advance ticket sales balance, including the long-term portion, ended 2023 at a year-end record of $3.2 bill, about 56% higher than at the end of 2019.

As a result of the ongoing conflict in Israel and the Red Sea, the company cancelled and redirected all calls to Israel during 4Q23, resulting in occupancy being 99.2% for the quarter, and full year occupancy was 102.9%, in line with guidance. All calls to Israel and the Red Sea have since been cancelled and redirected for the whole of 2024.

Prior to the conflict, around 7% of the 4Q23 capacity and 4% of capacity for the full year 2024 was scheduled to visit the Middle East, predominantly with Oceania Cruises and Regent Seven Seas Cruises.

Prior to the recent cancellations, about 1% of 2024 capacity was expected to sail through the Red Sea.

As of 31st December, 2023, NCLH had total debt of $14.1 bill, plus total net debt of $13.7 bill and continued to expect improvement in its net leverage.

At year-end, liquidity was $2.3 bill, consisting of around $402.4 mill of cash and cash equivalents, $1.2 bill of availability under the revolving loan facility and a $650 mill undrawn backstop commitment.

In March, this year, NCLH expected to refinance its $650 mill backstop commitment, replacing the secured commitment with an unsecured commitment. In addition, it expected to repay the $250 mill 9.75% senior secured note due 2028, the highest interest rate debt, as part of the refinancing plan.

“Throughout the year, we successfully implemented measures to rightsize our cost base. Notably, the fourth quarter of 2023 marked our fourth consecutive quarter of improved adjusted net cruise costs

“Excluding fuel per capacity day, this resulted in a substantial 21% reduction in 2023, compared to 2022,” said Mark  Kempa, NCLH’s Executive Vice President and CFO.

“Additionally, we made important advancements towards reducing leverage and de-risking our balance sheet during 2023. We repaid $1.9 bill of debt during the year, which included the pay down in full of our $875 mill revolving loan facility, and we remain confident that our strong liquidity position, ongoing cash generation and favourable growth prospects enable us to meaningfully reduce leverage over the course of 2024.

“We recently negotiated a refinancing of our $650 mill backstop commitment and in connection with that, expect to repay our highest rate debt, the $250 mill 9.75% senior secured notes, due 2028.

“This transaction, which is expected to close in early March, will reduce interest expense and improve leverage while releasing the related secured collateral, another important step forward in improving our balance sheet,” he confirmed.

 

Photo: ABB