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Carnival cuts profit outlook on Concordia, fuel

Carnival cuts profit outlook on Concordia, fuel
Carnival Corp. & plc cut its first quarter earnings guidance by 15 cents per share, to a loss in the range of 5 cents to 9 cents per share, and shaved 48 cents to 51 cents off its 2012 EPS, for a new range of $2.04 to $2.37. The new estimates cover Costa Concordia being out of service, one-time accident costs, higher fuel prices and a tiny boost from foreign currency.

The Costa Concordia impact for the first quarter is expected to be $71m, and fuel, an additional $46m. For the year, Costa Concordia loss of use, insurance deductibles and one-time costs are estimated at $155m to $175m, while fuel is estimated at an extra $230m. Currency will give an additional $10m boost, or 1 cent per share, for the year.

In Dec. 20 guidance, the company had forecast first quarter EPS in the range of 6 cents to 10 cents, and full-year EPS at $2.55 to $2.85.

Carnival said in a filing today that fleetwide booking volumes, excluding Costa, fell in the mid-teens from Costa Concordia’s capsize on Jan. 13 through Jan. 25, with the decline in booking volumes bottoming out on Jan. 16.

Though the company did not give guidance on Costa, citing the significant re-booking activity stemming from the loss of the ship’s use and related redeployments, Carnival said it expects Costa bookings to be down significantly.

In addition, Carnival anticipates further financial impacts as a result of Costa Concordia, such as lower net yields, that it said are not possible to determine at this time.

The company plans to provide revised 2012 earnings guidance, including these financial impacts, in March.

Carnival also stated it does not believe the Costa Concordia incident will have a significant long-term impact on its business.

The company put the net carrying value of the euro-denominated Costa Concordia at $490m (€379m) on Dec. 31. Carnival has euro-denominated insurance coverage of $510m (€395m at the Dec. 31 exchange rate) for damage to the ship with a potential deductible of approximately $30m as well as insurance for third party personal injury liability subject to an additional deductible of about $10m for the Concordia incident.

A damage assessment is being undertaken to determine whether the ship can be repaired and what the total cost would be. Carnival self-insures for loss of use of the ship, which it expects to impact 2012 net income by approximately $85m to $95m, or 11 cents to 12 cents per share, as earlier reported. The company also expects approximately $30m to $40m of other incident-related costs.