RCL remains positive despite heavy losses

2022-02-12T14:08:34+00:00 February 12th, 2022|Finance|

Royal Caribbean Group (RCL) reported US GAAP net loss of $5.3 bill or $20.89 per share for 2021, compared to $5.8 bill or $27.05 per share in the previous year.

RCL also reported an adjusted net loss of $4.8 bill or $19.19 per share for the full year, compared to $3.9 bill or $18.31 per share for 2020.

The fourth quarter of last year yielded a US GAAP net loss of $1.4 bill or $5.33 per share, compared to $1.4 bill or $6.09 in 4Q20.

Adjusted net loss was $1.2 bill or $4.78 per share for 4Q21, compared to $1.1 bill or $5.02 per share in the same period the previous year.

The losses were due to the impact of the COVID-19 pandemic on the business.

During 4Q21, the company eliminated the three-month reporting lag for Silversea Cruises to reflect the brand’s financial position, results of operations and cash flows concurrently and consistently with the company’s fiscal calendar.

In the fourth quarter, 12 more ships returned to service. Those that operated the Group’s core winter itineraries in 4Q21 achieved a load factor of 65%, while the quarter’s total load factor was 59%. Total revenue per passenger cruise day was up 10% versus the record 2019 levels driven by strong on board revenue performance.

Despite the impact from Omicron, total cash flow from ships in operation turned positive in the fourth quarter, RCL claimed.

“2021 marked the beginning of our return to our mission of delivering the very best vacation experiences,” said Jason Liberty, RCL Group President and CEO (pictured).

“During 2021, we made significant progress toward our recovery with over 85% of our capacity returning to operations and delivering safe and memorable experiences to approximately 1.3 mill guests at record guest satisfaction scores. Our team has worked tirelessly to execute our successful and healthy return, and we are grateful for their extraordinary efforts.

“We expect 2022 will be a strong transitional year, as we bring the rest of our fleet back into operations and well-nigh historical occupancy levels. Omicron created short-term operational challenges that have unfortunately weighed on close-in bookings. While the timing of Omicron was particularly unfortunate for the first half of 2022 bookings and will likely delay our return to profitability by a few months, we do not expect it to impact our overall recovery trajectory and the strong demand for cruising,” he said.

By the end of last year, the Group had 50 out of 61 ships in operations across its five brands, representing over 85% of its worldwide capacity. During the year, the Group carried around 1.3 mill guests across its brands, achieving record guest satisfaction scores and on board spend per passenger.

However, due to the impact of the Omicron variant, RCL experienced some service disruptions and cancelled several sailings in 1Q22, although it still expects to operate about 95% of its planned capacity in this quarter, it said.

Fourth quarter bookings were sequentially higher than 3Q21. Due to Omicron’s impact, bookings decreased in December and remained lower over the holiday period, but have started to increase with each consecutive week since the beginning of 2022 and are now back to pre-Omicron levels.

RCL said that it expects the whole fleet to be back to service before the 2022 summer season with load factors approaching historical levels in the third quarter of this year.

Notwithstanding the impact from Omicron, the Group expects to be operating cash flow positive in late spring, it said but also expects a net loss for the first half of 2022 and a return to profitability in the second half of the year.

“While 2021 was another challenging year financially, we finished the year in a stronger position than at the beginning and made great progress toward our recovery,” said CFO Naftali Holtz. “We are also immensely grateful for the incredible hard work and determination of our teams that made our return to sailing possible..

“Following a record US black Friday and cyber weekend, the spread of the Omicron variant resulted in a softening in booking volumes and an increase in near-term cancellations,” Holtz added speaking about bookings.

“Similar to our experience following Delta, we expect bookings to materially increase as we get further beyond the peak of cases. We are already seeing cancellations subside and bookings improve to pre-Omicron levels, and we have adjusted our sales and marketing efforts in anticipation of a delayed and extended WAVE period,” he said.

As of 31st December, 2021, the Group had around $3.2 bill in customer deposits, representing an improvement of about $400 mill over the previous quarter, despite the significant quarter-over-quarter increase in revenue recognition and near-term cancellations, due to Omicron, both of which reduced the customer deposits balance.

Customer deposit balance at year-end for 2Q22 forward sailings was higher than the balance held at the end of 2019 for 2Q22 forward sailings. Around 32% of the customer deposit balance is related to FCCs, compared to 35% in the previous quarter, a positive trend indicating new demand.

As at the end of last year, the Group’s liquidity was $3.5 bill, which included cash and cash equivalents, undrawn revolving credit facility capacity and a $0.7 bill commitment for a 364-day term loan facility.  However, this excludes proceeds from the $1 bill unsecured bond offering completed on 7th January this year.

“We remain focused on our disciplined approach to capital allocation and returning to profitability. Our liquidity position remains strong as we execute on our return to service. We continue to take actions to improve our balance sheet, address near-term maturities and reduce interest expense,” Holtz explained.