Marine Log

March 23, 2006

Carnival profits hit by fuel costs

Carnival Corporation & plc reported net income of $280 million, or $0.34 diluted EPS, on revenues of $2.46 billion for its first quarter ended February 28, 2006. First quarter 2006 earnings were reduced by approximately $0.02 per share due to a non-cruise investment write-down and a litigation reserve. Net income for the first quarter of 2005 was $345 million, or $0.42 diluted EPS, on revenues of $2.40 billion.

"As expected," said Chairman and CEO Micky Arison, "the company experienced $82 million in higher fuel costs due to a 63 percent increase in fuel prices. Excluding these significantly higher fuel costs, the company performed well during the quarter, with net revenue yield (net revenue per available lower berth day) growth outpacing increases in unit operating costs."

First quarter 2006 revenues increased approximately 3 percent, in line with the company's capacity growth during the quarter.

Net revenue yields for the first quarter of 2006 increased 1.2 percent compared to the prior year. Net revenue yields as measured on a local currency basis ("constant dollar basis"), which the company believes better reflects revenue performance, increased 3.3 percent over the same period last year.

The strengthening of the U.S. dollar against the euro and sterling compared to 2005 had a significant impact on reported yields and costs because a considerable portion of the company's business is transacted in those European currencies. Gross revenue yields decreased 0.4 percent.

Net cruise costs per available lower berth day ("ALBD") for the first quarter of 2006 increased 5.9 percent compared to the same period last year primarily due to significantly higher fuel costs.

On a constant dollar basis, net cruise costs per ALBD increased 8.4 percent from the same period last year. Excluding fuel costs, the company's 2006 first quarter net cruise costs per ALBD increased 2.1 percent compared to last year on a constant dollar basis, primarily due to the timing of expenditures between quarters. Gross cruise costs per ALBD increased 2.3 percent.

Discussing the forward outlook, Arison noted that the company entered this year's wave season with advance booking levels that were ahead of the same time in the prior year in terms of both occupancy and price. The wave season got off to a solid start in January, with the number of bookings and pricing slightly above comparable 2005 levels. However, since February, the number of bookings and pricing has been slightly below prior year levels. As of March 20, 2006, the company's cumulative advance bookings for the last nine months of 2006 are in a solid position with both occupancy and pricing up slightly over comparable levels last year.

"Although this year's wave season may not have been as protracted as the 2005 wave, our bookings for the year are in good shape and we expect to see positive yield growth for the year," Arison said.

Based on current internal forecasts, the company says it expects net revenue yields for the last nine months of 2006 to increase 1 to 2 percent (2 to 3 percent on a constant dollar basis), compared to last year. Net cruise costs are expected to be flat to down slightly (flat to up slightly on a constant dollar basis), compared to last year. The company's cost guidance for fuel is based on recent forward prices for fuel of $336 per metric ton for the balance of the year, which is 20 percent higher than average prices for the last nine months of 2005. Although fuel prices are expected to be higher than 2005 levels, fuel comparisons moderate throughout the balance of 2006. Excluding fuel, the company expects net cruise costs per ALBD to be down 2 to 3 percent on a constant dollar basis.

Based on these estimates, the company expects that diluted earnings per share for the full year 2006 will be approximately $2.90 to $3.00. This guidance is based on currency exchange rates of $1.19 to the euro and $1.75 to sterling.

For the second quarter of 2006, the company expects net revenue yields to be flat to up slightly (up 2 to 3 percent on a constant dollar basis), compared to last year. Net cruise costs per ALBD are expected to be up 2 to 3 percent (up 4 to 5 percent on a constant dollar basis), compared to last year. The increased costs are all attributable to the higher fuel price estimates, which, if realized, will cost the company approximately $60 million in the second quarter, based on recent forward prices for fuel of $331 per metric ton for the second quarter, which is 33 percent higher than the average price for the second quarter of 2005. Excluding fuel, the company's cost guidance for the second quarter of 2006 is for net cruise costs per ALBD to be flat to down slightly, on a constant dollar basis. Based on these estimates, the company expects diluted earnings per share for the second quarter of 2006 to be approximately $0.48 to $0.50.

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