Royal Caribbean has reported a US GAAP net loss of $1.6 bill for the second quarter of 2020 or minus $7.83 per share, compared to a GAAP net income of $472.8 mill or $2.25 per share in 2Q19.
The 2Q20 results include a non-cash asset impairment loss of $156.5 mill.
Adjusted net loss was $1.3 bill or minus $6.13 per share for the period, compared to an adjusted net income of $532.7 mill or $2.54 per share in 2Q19.
The loss was down to the impact of the COVID-19 pandemic on the business with no cruises completed in the second quarter of this year.
“The COVID-19 pandemic is posing an unprecedented challenge to our industry and society. Our teams are working tirelessly to return to service soonest and doing so by developing new health and safety protocols to protect the well-being of our guests, crew and destinations we visit,” said Richard Fain, Royal Caribbean Chairman and CEO (pictured). “In the meantime, we are using this time to refine our operations to be as efficient as we can while providing the great experiences that so many people are eagerly awaiting.”
Given the current environment, the company said that it continued to prioritise and boost its liquidity to ensure it is well positioned for recovery.
Royal Caribbean also explained that it had taken further actions to enhance its liquidity, preserve cash and secure additional financing. These included:
- The issuance of $1 bill of priority guaranteed notes and $1.15 bill of convertible notes.
• The issuance of £300 mill of commercial paper in the UK providing over $370 mill of additional liquidity.
• Completed a $0.9 bill 12-month debt amortisation holiday from all export-credit backed facilities. - Amended over $11 bill of commercial bank and export credit facilities to provide covenant waivers through the fourth quarter of 2021.
• Further reduced operating expenses, due to the fleet layup measures and actions to decrease sales, marketing and administrative expenses.
In addition, the company said it had $11.3 bill of committed credit facilities that are available to fund ship deliveries originally planned through 2025.
“We continue to take substantial actions to bolster our financial position,” said Jason Liberty, Executive Vice President and CFO. “We have accessed the capital market in an opportunistic manner and continue to aggressively manage our spend. We are prepared to navigate a volatile period while making decisions that position the company well for the recovery.”
Royal Caribbean estimated its cash burn to be in the range of about $250 mill to $290 mill per month during the prolonged suspension of operations. This includes all interest expenses, including the increases driven by the latest capital raises; ongoing ship operating expenses; administrative expenses; hedging costs; expected necessary capital expenditures (net of committed financings in the case of newbuildings) but excludes cash refunds of customer deposits, commissions, debt obligations and cash inflows from new and existing bookings.
The company said that it was considering ways to further reduce its average monthly cash burn under a further prolonged out-of-service scenario and during re-start of operations.
As of 30th June, 2020, the company had around $4.1 bill in liquidity in cash and cash equivalents. The company also said that the scheduled debt maturities for the remainder of 2020 and 2021, were $0.3 bill and $1.3 bill, respectively.
The expected capital expenditures for the remainder of 2020 and 2021 are $0.6 bill and $1.8 bill, respectively, which are mostly related to newbuilding projects.
Royal Caribbean also explained that COVID-19 had impacted shipyard operations which will result in newbuilding delivery delays. Currently, the company expects that three of the five ships originally scheduled for delivery between July, 2020 and December, 2021 will be delivered within the remaining time frame.
The extended cruising suspension has significantly impacted bookings for the remainder of this year, which were meaningfully lower than at same time last year and at lower prices.
Although still early in the booking cycle, the booked position for 2021 is trending well and is within historical ranges, the company claimed.
According to analysts, Royal Caribbean saw people COVID-19 testing as very likely to be part of its new safety measures used to resume cruises.
“We have not yet reached a point in our protocols where we’re ready to publish and release for discussion. But it’s very likely that testing will occur,” said Royal CEO, Michael Bayley.
Former US FDA Commissioner, Scott Gottlieb, is serving as co-chair of a cruise industry group called the ‘Healthy Sail Panel’ to assist Royal in mapping out a strategy.
Royal Caribbean said it expected the panel to approve a return-to-sailing plan by the end of this month for submission to the US CDC.
