Carnival Corporation & plc (NYSE/LSE: CCL;NYSE: CUK), the world’s largest cruise company, today released its second quarter business update and though there was plenty of red ink splashing around, investors liked the rest of what Carnival had to say enough to give the company’s stock a boost that saw the company’s share up by over 11% as of 2.30 p.m. today.
Other cruise shares also went up in Carnival’s slipstream, with both Norwegian Cruise Lines Holdings (NYSE: NCLH) and Royal Caribbean Cruises (NYSE: RCL) actually seeing bigger percentage gains than Carnival.
Highlights of the Carnival quarterly reported included:
- U.S. GAAP net loss of $1.8 billion and adjusted net loss of $1.9 billion for the second quarter of 2022.
- Cash from operations turned positive in the second quarter of 2022.
- Second quarter 2022 ended with $7.5 billion of liquidity, including cash, short-term investments and borrowings available under the company’s revolving credit facility.
- Revenue increased by nearly 50% in the second quarter of 2022 compared to first quarter 2022, reflecting continued sequential improvement. For the cruise segments, revenue per passenger cruise day (“PCD”) for the second quarter of 2022 decreased slightly compared to a strong 2019.
- Occupancy in the second quarter of 2022 was 69%, an increase from 54% in the prior quarter.
- Customer deposits increased $1.4 billion to $5.1 billion as of May 31, 2022 from $3.7 billion as of February 28, 2022.
- As of June 24, 2022, 91% of the company’s capacity is in guest cruise operation.
- Booking volumes for all future sailings during the second quarter of 2022 were nearly double the booking volumes during the first quarter of 2022; the company notes these were its best quarterly booking volumes since the beginning of the pandemic.
As previously announced, effective August 1, Arnold Donald, president and CEO, is being appointed vice chair of the boards of directors. Josh Weinstein, currently chief operations officer for the company, will assume the role of president and CEO of Carnival Corporation & plc. At that time, he will also assume the role of chief climate officer and become a director.
“With cash from operations turning positive and the company heading in the right direction, now is the time to transition leadership to the next generation,” said Donald. “Josh Weinstein has the skill set ideally suited to take this company forward, including strong operating experience and in-depth industry knowledge cultivated over the past two decades. I am confident our positive momentum will continue under Josh’s leadership and I remain confident in the long-term future of our company.”
RAMPING UP OPERATIONS
“We are aggressively, yet thoughtfully, ramping up to full operations with over 90 percent of the fleet now in service,” said Donald. “We are driving occupancy higher, while at the same time significantly increasing available capacity, resulting in a nearly 50 percent sequential improvement in revenue in the second quarter, despite facing constantly changing and far more restrictive protocols than broader society and travel at large.”
Donald added, “Carnival Cruise Line, our largest brand, achieved consistently positive adjusted EBITDA beginning in March. Carnival Cruise Line also became our first brand to sail its entire fleet in May and is expecting occupancy to approach 110 percent during our third quarter.”
As of June 24, 2022, 91% of the company’s capacity is in guest cruise operation. Five of the company’s nine brands now have their entire fleet back in guest cruise operations, including Carnival Cruise Line, which became the first major cruise line in the U.S. to celebrate its entire fleet entering service. The company says that its enhanced COVID-19 protocols have helped it become among the safest forms of socializing and travel, with far lower incidence rates than on land.
While the company says its adjusted cruise costs excluding fuel have benefited from the sale of smaller-less efficient ships and the delivery of larger-more efficient ships, this benefit is offset by a portion of its fleet being in pause status for part of the year, restart related expenses, an increase in the number of dry-dock days, the cost of maintaining enhanced health and safety protocols, inflation and supply chain disruptions. The company anticipates that some of these costs and expenses will end in 2022. Additionally, the company continues to expect to see a significant improvement in adjusted cruise costs excluding fuel from the first half of 2022 to the second half of 2022 with a mid-teens increase for the full year 2022 compared to 2019.
There’s still red ink ahead.
The company expects a net loss for the third quarter of 2022. For the full year 2022, the company also continues to expect a net loss. The company continues to believe that adjusted EBITDA will improve with the ongoing resumption of guest cruise operations and continues to expect improvement in occupancy throughout 2022 until it returns to historical levels in 2023. The company expects positive adjusted EBITDA for the third quarter of 2022.
- You can read the full business update HERE
- You can read the transcript of Carnival’s call with analysts HERE