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Carnival lifts 2014 profit on higher pricing, on-board spending despite Q4 GAAP loss

Carnival lifts 2014 profit on higher pricing, on-board spending despite Q4 GAAP loss
Carnival Corp. & plc ended the year with a 13-cent per share quarterly loss on a US GAAP basis compared to an 8-cent per share profit in Q4 2013. Excluding non-cash losses on fuel derivatives and other items, Carnival earned 27 cents per share on higher than expected ticket prices and on-board spending, ahead of the Wall Street consensus expectation of 20 cents. The company issued positive guidance for 2015.

Full year 2014 GAAP profit was $1.2bn, or $1.59 per share, up from $1.39 the year before, on revenues of $15.9bn, up from $15.5bn. The GAAP results include unrealized losses (non-cash) on fuel derivatives of $268m and $20m of net charges.

Non-GAAP profit for the full year was $1.5bn, or $1.96 diluted EPS, compared to non-GAAP profit of $1.2bn, or $1.58 diluted EPS in 2013. Guidance had been for EPS of $1.40 to $1.80

'Full year earnings were significantly higher than the prior year primarily due to strong profit improvement at both our Carnival Cruise Lines and Costa Cruises brands,' Carnival Corp. ceo Arnold Donald said. 'We enjoyed some early wins from our collaboration efforts that contributed to our improved results, particularly for on-board revenues.'

Donald noted Carnival contained costs and achieved an almost 5% reduction in fuel consumption for the year.

Q4's operating profit more than doubled due to higher ticket prices and on-board spending combined with lower costs, exceeding previous guidance. During the last quarter, the Carnival brand achieved a significant increase in revenue yields despite a highly competitive environment in the Caribbean. Additionally, Costa’s Asia operations achieved double-digit revenue yield improvement on a capacity increase in that region.

Q4 revenues were $3.72bn, up from $3.66bn. Net revenue yields in constant dollars increased 2.8%, better than the company's September guidance of up 1.5% to 2.5%.

Net cruise costs excluding fuel per available lower berth day decreased 1.7% in constant dollars, in line with September guidance. Fuel prices dropped 13% to $584 per metric ton from $671 per metric ton in Q4 2013 and were better than the September guidance of $635 per metric ton.

Non-GAAP profit was $210m, or 27 cents diluted EPS, before GAAP unrealized losses (non-cash) on fuel derivatives of $277m, or 36 cents diluted EPS, and other charges of $35m, or 4 cents EPS.

Carnival said cumulative advance bookings for the first three quarters of 2015 are currently ahead of the prior year at slightly higher prices. Since September, booking volumes for the first three quarters of 2015 are running ahead of last year’s levels at slightly lower prices driven by transactional currency impacts.

'The current base of business for 2015 builds confidence in our expectation of continuing yield growth with acceleration in yield improvement starting in the second quarter,' Donald said.

2015 net revenue yields, on a constant dollar basis, are forecast to be up approximately 2% year over year. First quarter revenue yields (constant dollars) are expected to be slightly higher than the prior year and improve during the remainder of 2015.

The company expects net cruise costs excluding fuel per ALBD, on a constant dollar basis, for 2015 to be up approximately 3%  primarily due to higher drydock costs, advertising expenses and product enhancements. Based on current spot prices for fuel, forecasted fuel costs for the full year 2015 are expected to decline $475m compared to 2014, net of fuel derivatives, benefiting the company by 61 cents per share.

This is forecasted to be partially offset by unfavorable movements in currency exchange rates costing 20 cents per share.

All in all, Carnival now expects 2015 non-GAAP diluted EPS in the range of $2.30 to $2.60, compared to 2014 non-GAAP diluted earnings of $1.96 per share.

First quarter constant dollar net revenue yields are expected to be flat to up 1% compared to the prior year. Net cruise costs excluding fuel per ALBD are projected 5.5% to 6.5% higher on a constant dollar basis compared to the prior year and are higher than full year guidance mostly due to the timing of expenses. Current currency exchange rates and fuel prices net of fuel derivatives are expected to benefit Q1 by $130m compared to the prior year, or 16 cents per share.

Carnival's guidance is for a Q1 profit in the range of 7 cents to 11 cents per share, compared to flat non-GAAP earnings in Q1 2014.

 

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