Carnival’s Results Better than Expected

British-American owned cruise line Carnival Corporation & plc has raised its expectations for the full year 2014 net revenue yield amid improvement in booking trends.

“The sustained improvement in booking trends as we have progressed through the year combined with yield increases in the second half of 2014 builds confidence that we will see continued yield growth in 2015 and beyond,” said Carnival Corporation & plc President and Chief Executive Officer Arnold Donald.

Donald also noted that new product initiatives and innovative marketing campaigns implemented across the brands over the past year are driving the improvement in consumer demand and pricing trends.

The company announced non-GAAP net income of $1.2 billion, or $1.58 diluted EPS for the third quarter of 2014 compared to non-GAAP net income for the third quarter of 2013 of $1.1 billion, or $1.38 diluted EPS.

For the third quarter of 2013, U.S. GAAP net income, which included impairments net of unrealized gains on fuel derivatives of $139 million, was $934 million, or $1.20 diluted EPS. Revenues for the third quarter of 2014 were $4.9 billion, compared with $ 4.7 billion the prior year.

 “Strong close-in demand and higher onboard spending helped drive significantly better than expected third quarter results and 15 percent year-over-year earnings improvement. Our Asia operations performed particularly well during the quarter, driven by a double-digit yield increase in our China program, further solidifying our industry leading presence in this important emerging cruise market. 

Our continental European operations also enjoyed strong yield and profit improvement in the quarter, reflecting continued progress for the Costa brand. In addition, our summer Caribbean product successfully attracted nearly 20 percent more guests than the prior year, reinforcing the popularity of the world’s largest cruising region,” Donald added.

For fiscal 2015, net cruise costs excluding fuel per ALBD are expected to increase approximately three percent due primarily to a significantly higher level of dry-dock days scheduled next year to install new air emissions technology as well as other technology designed to improve fuel efficiency, the company said.

The company expects the exhaust gas cleaning system or scrubber technology will be installed on approximately 70 percent of its fleet by 2016, thus enabling the company to meet the 2015 stricter air emissions standards as well as mitigate escalating fuel costs that will result from the new requirements.

The company anticipates the new regulations will result in higher fuel costs in 2015 of approximately $0.10 per share with that increase expected to be reduced by half in 2016 and mostly offset in 2017 based on the system roll-out.

Also, in 2016, the company plans to revert back to a more normalized dry-dock schedule, which will offset approximately half of the increase in 2015 net cruise costs excluding fuel.

“Our implementation of the air emissions technology is a sound investment in our company’s future and more importantly it will benefit the environment for years to come,” said Donald. “These technology investments are laying a solid foundation towards sustainable earnings improvement. Combined with our other strategic initiatives designed to foster revenue growth and contain costs, we are gaining momentum towards our goal of achieving double digit returns on investment over time.”

Carnival announced that Alan Buckelew, Chief Operations Officer, will be expanding his leadership role by relocating to China to more closely oversee the company’s growing operations in the country.

Buckelew’s experience in Asia is extensive, previously serving as the CEO of Princess Cruises before taking on the assignment of Chief Operations Officer for Carnival Corporation & plc.  In his expanded role, he will lead all of the company’s initiatives in China, while also continuing to provide oversight of all maritime and port operations around the world and a number of related functions as part of his COO role.

This past May, the company announced Costa Serena will deploy year-round in China next year, making Carnival Corporation the first global cruise company with four ships based in China, one of the world’s fastest-growing cruise markets. Costa Cruises plans to debut Costa Serena inShanghai in April 2015, where it will join Costa Victoria and Costa Atlantica, sister ships already deployed in China. The move will increase Costa’s overall capacity in Asia by 74 percent.

In addition to Costa Serena, Princess Cruises — another iconic Carnival Corporation brand — began home-porting the Sapphire Princess out of Shanghai this past summer.

Adding a third ship based in China this year increases Carnival Corporation’s total 2014 capacity in the country by 66 percent. In 2015, with four ships based in China for the first time, Carnival’s industry-leading capacity is expected to jump 140 percent over a two-year period.