What's the best way for a shipowner to avoid having a ship hijacked by pirates?

Reroute the ship even if it means a huge diversion
Stay within recommended safe limits and patrolled areas
Hire an on-board security team
Just hope for the best

December 19, 2008

Carnival lowers expectations for 2009

Thanks to a $31 million gain on the sale of the QE2, Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) reported a $13 million improvement in 2008 fourth quarter net income compared with last year's fourth quarter.

But Chairman and CEO Micky Arison said that "as expected, 2009 is shaping up to be a challenging year in the travel industry" and the company now forecasts full year 2009 earnings per share to be in the range of $2.25 to $2.75, compared to its previous guidance range of $2.50 to $3.00.

Carnival reported net income of $371 million, or $0.47 diluted EPS, on revenues of $3.3 billion for the fourth quarter ended November 30, 2008. Net income for the fourth quarter of 2007 was $358 million, or $0.44 diluted EPS, on revenues of $3.1 billion. .

Net income for the full year ended November 30, 2008 was $2.3 billion, or $2.90 diluted EPS, compared to net income of $2.4 billion, or $2.95 diluted EPS, for the prior year. Revenues for the full year 2008 increased to $14.6 billion from $13.0 billion for the prior year.

Mr. Arison indicated that operating results in the fourth quarter were better than the company's September guidance primarily due to lower fuel costs, and stronger than expected revenue yields on close-in bookings.

Mr. Arison said that "achieving increased fourth quarter earnings is a significant accomplishment considering the challenging environment. Higher ticket prices for our North American brands, combined with our continued focus on managing controllable costs helped us offset $84 million of higher fuel expense during the quarter."

For the full year,he said that "even though fuel increased 55 percent, costing the company $626 million more than in 2007, excellent cost controls and a 2.4 percent revenue yield improvement allowed us to post solid earnings in a very difficult year."

Key metrics for the fourth quarter of 2008 compared to the prior year were as follows:

On a constant dollar basis net revenue yields (revenue per available lower berth day) increased 2.0 percent for Q4 2008. Net revenue yield in current dollars decreased 2.1 percent due to unfavorable currency exchange rates. Gross revenue yields decreased 2.1 percent.

Excluding fuel, net cruise cost per available lower berth day ("ALBD") for Q4 2008 was 3.9 percent lower than the prior year on a constant dollar basis.

Including fuel, net cruise costs per ALBD increased 0.3 percent on a constant dollar basis (decreased 2.8 percent in current dollars). Gross cruise costs per ALBD decreased 2.6 percent.

Fuel price increased 24 percent to $538 per metric ton for Q4 2008 from $433 per metric ton in Q4 2007.

During the fourth quarter, the company successfully introduced Princess Cruises' 3,080-passenger Ruby Princess, which offers seven-day Western Caribbean cruises from Fort Lauderdale, Fla.


For 2009, occupancy levels for advance bookings are running behind the prior year, with ticket prices for these bookings also at lower levels.

"As expected, 2009 is shaping up to be a challenging year in the travel industry," said Mr. Arison. Over the years we have positioned the company to weather the difficult economic environment we now face. We have strong cash flows from operations, a solid balance sheet, and a secure liquidity position. In addition, we have maintained our high investment grade credit rating. These factors combined with the outstanding value proposition inherent in a cruise vacation and our low cost structure will prove to be significant assets in the current environment."

On a constant dollar basis, the company expects full year net revenue yields to decrease 6 to 10 percent compared to 1 to 5 percent in the company's October guidance. The reduction in the company's yield guidance is due in large part to the recently announced fuel supplement refund for 2009 bookings combined with a further forecasted reduction in revenues due to deteriorating economic conditions. As a result of changes in currency exchange rates, the company forecasts an 11 to 15 percent decline in net revenue yields for the full year 2009 compared to 2008.

The company expects net cruise costs excluding fuel for the full year 2009 to be higher by approximately 2 percent on a constant dollar basis of which approximately 1 percent is due to one-time credits which reduced 2008 costs. The continued decline in fuel prices are forecasted to reduce fuel expense in 2009 by $278 million compared to our previous guidance.

The company's revised 2009 guidance is based on current spot prices for fuel of $295 per metric ton and currency exchange rates of $1.38 to the euro and $1.53 to sterling.

Taking all the above factors into consideration, the company now forecasts full year 2009 earnings per share to be in the range of $2.25 to $2.75, compared to its previous guidance range of $2.50 to $3.00.

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