Thursday, September 20, 2000
Cruise prices still under
Net income for the nine months ended August 31, 2000, was $771.7 million on revenues of $2.93 billion, compared to $776.2 million on revenues of $2.71 billion for the same period in 1999.
Higher revenues during the third quarter of 2000 were primarily driven by an 11.3 percent increase in cruise capacity provided by Carnival Cruise Lines' 2,758-passenger Carnival Triumphand Holland America Line's 1,440-passenger Volendam and Zaandam.
Arison said that operating results were largely in line with expectations given the continued pressure on pricing, higher fuel costs and the loss of five seven-day cruises due to the unscheduled drydocking of Carnival Cruise Lines' Paradise. Nonetheless, cruise operating earnings grew by $4.8 million in the third quarter compared to the same period in 1999.
"Although we were not satisfied with third quarter financial results, our ships operated at a 112.4 percent occupancy rate, reflecting a 13.9 percent increase in passengers carried during the quarter,'' Arison said. He also pointed out that the company has carried close to 2 million passengers in the first nine months of 2000 compared to 1.75 million for the same period in 1999. ``The record number of passengers carried will provide the various Carnival cruise brands with a growing base of satisfied guests to draw upon, which bodes well for future business,'' Arison explained.
For fiscal 2001, Carnival's cruise capacity is expected to grow 11.5 percent. excluding Costa Crociere. The company expects to close on the purchase of the remaining 50 percent interest in Costa , Europe's leading cruise company, from Airtours, plc within the next two weeks.
"Carnival's 100 percent ownership of Costa is expected to give the company the platform for further expansion into the European marketplace, one of the fastest growing cruise markets in the world,'' Arison said. He added that Costa is already expanding with the July 2000 debut of the 2,112-passenger CostaAtlantica, which has garnered rave reviews in Europe. Also, Costa recently announced the signing of a new contract for the construction of a CostaAtlantica sister ship, which is expected to be delivered in 2003.
Providing an early glimpse into fiscal 2001, Arison indicated that he is encouraged by strengthening booking trends during recent months, which may suggest the company has reached a bottom in cruise pricing. "If these stronger booking trends continue, we are optimistic that we will start to see positive earnings growth for the full fiscal year 2001,'' he added. "However, largely because of the unusually high-priced millennium sailings in the first quarter of this year, net earnings for the first fiscal quarter of 2001 are expected to be lower than this year's first quarter.''
Inland operator warns on earnings
Based in Houston, Kirby Corporation, Texas, operates 774 inland tank barges, with 14.0 million barrels of capacity, and 229 towing vessels.I ts diesel engine services operation provides after-market service for medium-speed diesel engines used in marine, power generation and rail applications.
To date, says Kirby, third quarter volumes, with the exception of refined product volumes, are as anticipated. Refined product volumes were strong in the first and second quarters, but weakened during the third quarter. In addition, fuel prices have increased significantly. Approximately 75% of Kirby's transportation revenues are from term contracts which contain cost escalation clauses allowing increases in fuel costs to be passed through to its customers. However, there is typically a 30 to 90 day delay before contracts are adjusted for fuel costs. When fuel prices decrease, the same is true, but in Kirby's favor. The balance of Kirby's transportation revenues are generated by spot market business. Market forces dictate whether spot market pricing will allow Kirby to recover fuel cost increases. Currently, the spot market is not allowing Kirby to pass on fuel cost increases.
The increase in fuel costs in August and September is anticipated to cost Kirby an estimated $.02 per share of net earnings for the 2000 third quarter. The average cost of fuel consumed was $.75 cents per gallon in July, increasing to an average of $.97 per gallon in August. Currently, Kirby's fuel cost is $1.05 per gallon.
Kirby says it is "also experiencing some additional administrative costs" in the development of management information systems for the future, overtime associated with the integration of Kirby and Hollywood and vessel crew training costs associated with a very tight vessel crew labor market.
Kirby's diesel engine services segment third quarter results are anticipated to be below the reported results for the first and second quarters of 2000. The segment continues to experience soft engine rebuild and rail businesses. The Gulf Coast drilling and offshore supply vessel market has improved, but not to a level offsetting shortfalls in other areas.