October 31, 2008
Carnival to suspend 2009 dividends
Carnival Corporation & plc--the largest cruise vacation group in the world--today declared a December dividend of $0.40 per share but said its Board had voted to suspend its quarterly dividend for the next quarter "as a result of the highly volatile state of the financial markets."
Carnival intends to maintain the dividend suspension throughout 2009 but will reevaluate its dividend policy based on the circumstances prevailing during the year.
"The company's cash flow remains strong. However, in light of the unusually high cost of raising new capital, continuing concerns about financial institution liquidity and current uncertainties in the global economy, we believe that preserving cash is a prudent step which will further strengthen the company's balance sheet and enhance our financial flexibility," said Micky Arison, Carnival Corporation & plc chairman and CEO. The dividend suspension would result in annualized cash savings of approximately $1.3 billion. The significant liquidity provided by the dividend suspension gives the company the flexibility to fund its 2009 capacity growth without the need to access credit markets.
The company has increased its previous full year 2008 earnings per share guidance from $2.79 to $2.81, to $2.81 to $2.83 primarily based on revised currency exchange rates and fuel prices.
However, the company has experienced a further slowdown in booking volumes during the recent turmoil in the financial markets. Looking at the first half of 2009, occupancy levels for advance bookings lag the prior year, with ticket prices for these bookings on a constant dollar basis at slightly higher levels compared to the prior year.
The company says it is providing 2009 earnings per share guidance in the broader range of $2.50 to $3.00 given the uncertain economic outlook. Factoring in the slowdown in bookings, the company is forecasting full year constant dollar net revenue yields (revenue per available lower berth day) to be lower by 1% to 5% compared to the prior year. The recent significant movement in the euro and sterling currencies results in lower current dollar net revenue yields by 7% to 11%. However, the recent decline in fuel prices will result in a significant benefit to the 2009 full year financial results. The company's 2009 guidance is based on fuel prices of $380 per metric ton and currency exchange rates of $1.30 to the euro and $1.64 to sterling. Further guidance on the 2009 fiscal year will be provided with the fourth quarter earnings release to be issued in December 2008.
Stock Repurchase and Issuance
In addition, the company filed a supplemental prospectus today to issue up to 19.2 million Carnival Corporation shares in the U.S. market. The shares will be issued from time to time in "At The Market" (ATM) transactions with the proceeds being used to repurchase shares of Carnival plc in the UK market (Stock Swap). Since Carnival plc shares are currently trading at a discount to Carnival Corporation shares, the company would derive an economic benefit from the stock swap.
The company will only issue Carnival Corporation shares in the U.S. market to the extent it can complete the stock swap with a resulting economic benefit. Arison added that "the dual listed company structure reflects the company's global brand portfolio and it remains committed to the Carnival plc listing on the London Stock Exchange as the company benefits from a more diversified shareholder base and greater access to global capital markets."