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Carnival Corporation & plc reports second quarter results

  • Written by Teijo Niemelä
  • Category: Top Headlines

Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) announced non-GAAP net income of $159 million, or $0.20 diluted earnings per share for the second quarter of 2012. Reported U.S. GAAP net income, which includes unrealized losses on fuel derivatives of $145 million, was $14 million, or $0.02 diluted earnings per share. Net income for the second quarter of 2011 was $206 million, or $0.26 diluted EPS. Revenues for the second quarter of 2012 were $3.5 billion compared to $3.6 billion for the prior year.

Carnival Corporation & plc Chairman and CEO Micky Arison noted that non-GAAP earnings were better than anticipated in the company’s March guidance due primarily to a combination of higher than expected revenue yields and lower than expected costs, partly attributed to non-recurring items, in the second quarter.

Commenting on the second quarter, Arison said "Cruise ticket prices (excluding Costa) held firm close to sailing which, combined with stronger than expected onboard revenues, drove yields above prior year levels. Our North American brands performed well, achieving a 3 percent revenue yield improvement compared to the prior year, which more than offset slightly lower yields for our Europe, Australia and Asia brands (excluding Costa). In addition, continued focus on cost controls and fuel consumption helped to mitigate the impact of higher fuel prices in the quarter." 

Key metrics for the second quarter 2012 compared to the prior year were as follows:

– Second quarter results included $17 million, or $0.02 per share, of insurance proceeds in excess of net book value which were previously expected to be received in the third quarter, and $17 million, or $0.02 per share, received from a litigation settlement.

– On a constant dollar basis net revenue yields (net revenue per available lower berth day, “ALBD”) decreased 1.4 percent for 2Q 2012, which was better than March guidance, down 2.5 to 3.5 percent. Excluding Costa, net revenue yields increased 1.1 percent for 2Q 2012, which was also higher than March guidance of flat to down slightly. Gross revenue yields decreased 4.2 percent in current dollars.

– Net cruise costs per ALBD excluding fuel and non-recurring items decreased 2.2 percent in constant dollars, better than March guidance of flat to down 1.0 percent. Gross cruise costs per ALBD including fuel and non-recurring items decreased 3.6 percent in current dollars.

– Fuel prices increased 12 percent to $756 per metric ton for 2Q 2012 from $673 per metric ton in 2Q 2011, costing the company an additional $71 million. Fuel prices were slightly lower than March guidance of $772 per metric ton.

– In March, the company entered into zero cost collars for an additional 19 percent of its estimated fuel consumption for the second half of fiscal 2012 through fiscal 2013, bringing the total covered to 38 percent over this period. The company also has zero cost collars in place that cover 19 percent of its estimated fuel consumption for fiscal 2014 and 2015. For further information on the company’s fuel derivatives program see “Fuel Derivatives” below.
– Three new ships were delivered during the second quarter, Costa Fascinosa, AIDAmar and Carnival Breeze, each featuring a variety of unique and exciting innovations which have generated strong consumer and media interest.

2012 outlook

Since March, fleetwide booking volumes have continued to improve and are running well ahead of the prior year at lower prices. For the last seven weeks, booking volumes excluding Costa have increased 8 percent versus the prior year, while booking volumes for Costa over the same time period are up 25 percent. For the remainder of the year, cumulative advance bookings excluding Costa are three occupancy points behind the prior year at slightly lower prices while cumulative advance bookings for Costa are at lower occupancies and lower prices compared with the prior year.

Looking forward, Carnival Corporation & plc Chairman and CEO Micky Arison commented, "The increase in booking volumes indicates that a progressive recovery is well underway and we are catching up following the slowdown in bookings during wave season, our peak booking period. The attractive pricing we have in the marketplace is clearly stimulating demand, especially for the Costa brand. We are pleased to see the resurgence in consumer demand for Costa, which is a testament to the brand’s long-standing reputation for quality built over many decades."

Excluding Costa, the company forecasts full year 2012 net revenue yields, on a constant dollar basis, to be down slightly. Including Costa, the company expects a decline in net revenue yields of 3 to 4 percent (constant dollars). The company has slightly reduced the mid-point of its 2012 yield guidance as the price incentives required to drive the booking volumes needed to close the occupancy gap was more than had been previously anticipated for the second half of the year. Full year 2012 revenue yields for the North American brands are expected to be in line with the prior year. Full year 2012 revenue yields for the European brands, excluding Costa, are expected to be lower than the prior year.

Lower net revenue yield expectations have been offset by greater than anticipated cost reductions. The company expects net cruise costs, excluding fuel, per ALBD for the full year 2012 to be down slightly compared with the prior year on a constant dollar basis. In addition, lower fuel prices (net of forecasted realized losses on fuel derivatives) partially offset by changes in currency exchange rates are expected to increase full year 2012 earnings by $0.30 per share compared to March guidance.

Taking all the above factors into consideration, the company forecasts full year 2012 non-GAAP diluted earnings per share to be in the range of $1.80 to $1.90, compared to the March guidance range of $1.40 to $1.70 per share and 2011 non-GAAP earnings of $2.42 per share.

Arison stated, "The long term fundamentals of our business remain sound. As we look toward the future, we are excited by the prospect for continued global expansion beyond our established markets in North America and Western Europe. We are pursuing multiple opportunities to develop emerging cruise markets including positioning a second Costa ship in China and through a series of Princess cruises dedicated to the Japanese market in 2013."

Third quarter 2012 outlook

Third quarter constant dollar net revenue yields excluding Costa, are expected to decrease 3 to 4 percent (including Costa, expected to decrease 6 to 7 percent) compared to the prior year. Net cruise costs excluding fuel per ALBD for the third quarter are expected to be down slightly on a constant dollar basis compared to the prior year. In addition, changes in currency exchange rates partially offset by lower fuel prices (net of forecasted realized losses on fuel derivatives) are expected to reduce third quarter earnings by $0.03 per share compared to the prior year. Based on the above factors, the company expects non-GAAP diluted earnings for the third quarter 2012 to be in the range of $1.42 to $1.46 per share versus 2011 non-GAAP earnings of $1.69 per share.

Regent Seven Seas reported to be close to newbuilding order

  • Written by Kari Reinikainen
  • Category: Top Headlines

Regent Seven Seas, the luxury line whose last new-build was introduced in 2003, is close to placing an order for a new ship, Regent's President and CEO Mark Conroy has told Cruise Critic.

Conroy was is in London last week ahead of a President's Cruise on Seven Seas Mariner, which departed Rome on Saturday, 15 June. “Though not radically different size-wise from the 42,363-ton, 700-passenger Seven Seas Voyager, which features all-suite accommodations and three speciality restaurants, there will be some enhancements. Plans for the as-yet unnamed newbuild include a bigger spa, ‘slightly bigger suites' and up to 750 passengers,” the report said.

Rumours of a new Regent ship have been circulating for years but gained particular momentum last year, when Frank del Rio, chairman of Prestige Cruise Holdings,which is Regent's parent, admitted he'd been thinking about expanding the three-ship fleet. (In fact, even prior to PCH's acquisition of Regent Seven Seas in 2008 Conroy had expansion in mind – and blueprints at the ready).

Conroy said: “It makes sense to build another ship and add more capacity when we are comfortable to do that, and that means we need regular occupancy rates. As abrand you have to keep reinventing yourself, and eventually you have to increase capacity.”

In 2011, a very challenging year for the luxury cruise niche, Regent had an astonishing 92 percent occupancy rate, with just 11 cruises that were not 100% full throughout the whole year. Conroy noted that it's likely that the new vessel will be built at one of Fincantieri's Italian shipyards, (Seven Seas Voyager was built at Italy's T.Mariotti), but Conroy would not be drawn on a launch date.

Arguably, the time is now right: occupancy levels are the highest they have ever been and UK sales are up 120% year-on-year according to Graham Sadler, Regent's UK Managing Director, Cruise Critic said.

Regent Seven Seas, which is part of the Prestige Cruise Holdings group that also owns Oceania Cruises, has three ships at the moment: Seven Seas Mariner, Seven Seas Voyager and Seven Seas Navigator.

Silversea acquires Galapagos tourism company and expedition ship

  • Written by Teijo Niemelä
  • Category: Top Headlines

The Silversea Group announced today that it has purchased Canodros S.A., the premier Ecuadorian tourism company that operates in the Galapagos Islands, and their upmarket expedition ship, Galapagos Explorer II.

Silversea plans to add Galapagos Explorer II to its ultra-luxury fleet of six ships next year, after the all-suite, 100-guest vessel undergoes a major refurbishment in September 2013 and is given a new name, steps that will ensure consistency with the standards of the Silversea fleet.

Until that time, Galapagos Explorer II will continue on its planned schedule of cruises and will continue to be operated by Canodros, which is based in Guayaquil, Ecuador. Canodros will also continue handling reservations for Galapagos Explorer II, as well as sales and marketing through its established network of travel companies and tour operators.

The acquisition will enable the award-winning cruise company chaired by Manfredi Lefebvre to expand the Silversea Expeditions brand. Its existing expedition ship, Silver Explorer, is regularly deployed in the polar regions, and the addition of a second vessel, offering year-round unique luxury expedition cruises in the Galapagos archipelago, means Silversea will have the opportunity to offer the adventure traveler a broader portfolio of itineraries, encompassing some of the world's most desired and least explored regions.

The 4077-ton Galapagos Explorer II offers the stylish elegance of a mega-yacht, attentive onboard service and an enriching naturalist education program. All of its 50 spacious suites feature ocean views and 24 include private balconies. Public spaces include a restaurant, piano bar, library and Internet station, main lounge, outdoor bar, two outdoor whirlpools, and a marine observation deck.

Guests sailing aboard Galapagos Explorer II will continue to enjoy the same exciting itineraries, luxury accommodations, shipboard amenities, informative lectures and sustainable tourism for which Canodros is known.

Guests currently booked on Galapagos Explorer II, and travel agents or tour operators with clients booked on the ship, should continue to liaise through their normal channels with Canodros for any needed assistance with their reservation.

In the coming months, Silversea will announce more details concerning plans for the ship after it is renovated and renamed.

Costa Crociere reports 28% rise in bookings April-May

  • Written by Kari Reinikainen
  • Category: Top Headlines

Costa Crociere, the Italian unit in Carnival Corp & plc group, says it has recorded a 28% year-on increase in bookings in the April-May period.

“On 25 May, Costa Cruises reached one million guest bookings for cruises in 2012 and was the first European company to top the million mark back in 2007, a feat it has continued to achieve every year since. What’s more, in April and May this year, Costa Cruises achieved booking volumes that were 28% higher than those recorded for the same months in 2011,” the company said in a statement.

The company said the recovery following the sinking of Costa Concordia on 13 January was due to its marketing activities, as well as the support of its customer base and partners. “The latest sales figures reflect the company’s strong business fundamentals, the quality of its product and unfailing customer loyalty,” Costa said.

New AIDA ships to feature Mitsubishi’s air lubrication system

  • Written by Kari Reinikainen
  • Category: Top Headlines

Mitsubishi Heavy Industries, Ltd. (MHI) will install its innovative "Mitsubishi Air Lubrication System" (MALS) on two large cruise ships to be built for the AIDA Cruises, a German brand of Carnival Corporation & plc.

MALS is MHI's proprietary technology that reduces fuel consumption and carbon dioxide (CO2) by a layer of airbubbles blown out from the vessel's bottom. The application of the MALS for the two cruise ships ordered by AIDA Cruises was decided in light of the customer's keen interest in lowering fuel consumption and easing the burden on the environment. The system is expected to reduce the vessel's fuel consumption by approximately 7%. The event marks the world's first installation of MALS on a cruise ship. It is also a significant milestone for the MALS as the cruise shipping industry requires definite quality and performance on any devices so this first application in this sector further demonstrates its reliability to the whole shipping industry.

MHI received the order for the two cruise ships in November 2011. The 125,000 gross ton, 3,250 passenger ships will be the largest ever constructed for AIDA Cruises. Construction will take place at MHI's Nagasaki Shipyard & Machinery Works, with deliveries scheduled for the spring of 2015 and 2016, respectively. The air blown out by the MALS from the vessel's bottom produces small air bubbles which cover the vessel's bottom like an "air-carpet", which reduces friction between the hull and seawater during navigation. For the MALS, MHI uses special in-house developed high-efficiency blowers and state-of-the-art fluid simulation analysis tools to configure the arrangement of air outlet points to achieve maximum friction reduction at optimized air-blow volume. With these advanced innovations, MHI expects a 7% energy-saving effect. In 2010, MHI has already verified theperformance of the MALS with an approximately 13% fuel consumption reduction during extensive sea trials on two module carriers which was the first commercial application of the MALS for the vessel in operation.

Following the successful launching of the MALS on module carriers, MHI has completed a newly developed concept design for bulk carriers, a major marine transportation vessel, that enables anapproximately 25% reduction in CO2 emissions compared to conventional vessels, thanks to application of the MALS complemented with high-efficiency hull form and improved propulsion system. MHI will provide its conceptual design of this energy-saving bulk carrier for three grain carriers to be built for Archer Daniels Midland Company (ADM), a major U.S. grain handler.

Given the current trend toward adoption of international marine transportation rules for reducing environmental burdens, coupled with continuing fuel price escalation, demand for more energy-efficient vessels is steadily increasing. In response, MHI aims not only to further strengthen its marketing activities for new MALS-installed ships such as module carriers, bulk carriers and cruise ships; it also intends to promote business in retrofitting MALS to existing vessels. Simultaneously, the company will conduct focused marketing activities for its environment and energy-saving related technologies, including licensing of MALS technologies, and also build up its engineering business through provision of eco-ship related technologies and increased sales of energy-saving systems.

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