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Genting Hong Kong narrows 2017 loss to US$244.3m

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Genting Hong Kong's 2017 loss of US$244.3m was down from its $504.2m loss in 2016, due mainly to a one-off gain of $205m for the disposal of certain available-for-sale investments and the absence of a 2016 impairment loss of $305m on ordinary shares in Norwegian Cruise Line Holdings.

These were offset by start-up losses for Dream Cruises' World Deam in Hong Kong and the repositioning of Genting Dream to Singapore in November, Crystal Cruises' brand extension in the river segment and the launch of AirCruises.

Total revenue rose to $1.19bn, up from $1.02bn. Genting HK has three business sectors: primarily cruise operations, but also shipyards and non-cruise activities.

Revenue from cruise-related activities increased 11.9%, to $1bn, up from $908m in 2016. Capacity days rose 33.7%, mainly due to the full year operation of Genting Dream and Crystal Mozart, along with the introductions of World Dream, Crystal Bach and Crystal Mahler during 2017.

Net yield fell to $164.40 from $192.80, and occupancy was lower, 77.2% compared to 81.7%.

The company said Dream Cruises, launched slightly more than a year ago, is performing well with improving occupancies and net yields in both the Hong Kong/Guangzhou and Singapore markets. However, Genting HK blamed pressures on occupanies and yields at Star Cruises due to the arrival of competitors' new and larger ships, causing smaller, older vessels to reposition to ports where Star operates. The company said the situation should improve as competitors plan to reduce capacity approximately 18% by year's end.

Crystal, too, faced significant competition in 2017 as new ships introduced by competitors led to about a 16% increase in luxury berths. The renovation of Crystal Symphony late last year and of Crystal Serenity late this year are decreasing the brand's capacity, adding suites and facilitating open-seating dining, which Genting HK called 'an essential feature' for Crystal to compete more effectively.

Meanwhile, shipyard cluster MV Werften recorded a full year of start-up losses in 2017, compared to eight months of losses in 2016. The steel-cutting for expedition yacht Crystal Endeavor in January and for Dream's first Global-class ship earlier this month are expected to capitalize the shipbuilding cost as part of the newbuilds.

Revenue from shipyard operations and non-cruise activities from external customers rose 60.6% to $174.4m, up from $108.6m, primarily due to shipyard activities and sales of residential property units in China.

Total operating expenses, excluding depreciation and amortization, increased to $1.07bn from 2016's $848.8m, related to the full year operation of Genting Dream and Crystal Mozart as well as the launch of World Dream, Crystal Bach, Crystal Mahler and AirCruises during 2017, and full year start-up and newbuild activities at the German shipyards to gear up for starting production on Crystal's Endeavor-class and Dream's Global-class ships in 2017.

Sales, general and administrative expenses, excluding depreciation and amortization, rose 10.2% to $285.2m from $258.9m, mainly due to the full year operation of Genting Dream and higher marketing costs for Crystal Cruises.

Net cruise cost per capacity day decreased 10.2% thanks to better cost control in the Star Cruises and Dream Cruises fleets, partially offset by higher fuel expenses of $401 per metric ton compared to 2016's $318.

Depreciation and amortization expenses ballooned 44.1% to $190.5m due to additional depreciation of new Dream and Crystal vessels and the full year depreciation of the German shipyards acquired in April 2016.