Royal Caribbean Books Stronger Full Year Results in 2019

Global cruise vacation company Royal Caribbean Cruises reported US GAAP net income of USD 1.9 billion for the full year of 2019, up from the 2018’s equivalent of USD 1.8 billion.

The company said that the result was achieved despite a series of extraordinary events including the dry-dock incident in the Grand Bahama shipyard, the cancellation of the cruises to Cuba and an unusual hurricane season, all of which had a negative impact on the company’s results for the year.

The main drivers behind the year-over-year increase were the consolidation of Silversea’s operations, the new cruise terminal in Miami, investments in the company’s private destinations and technology, and more drydock days.

In addition, the company has introduced its 20>25 by 2025 program laying out specific goals for the future.

The program includes several goals by 2025, including delivering USD 20.00 adjusted earnings per share; further reducing the company’s carbon footprint by 25%; delivering strong returns on invested capital; and continuing to improve on record guest satisfaction and employee engagement metrics.

“We are pairing ambitious business and environmental goals because we all understand that businesses must do our part to meet the needs of all our stakeholders,” said Richard D. Fain, chairman and CEO.

“Over the last years, our people have worked hard to deliver strong performance on both profitability metrics and important societal goals. This 20>25 by 2025 program should help take those efforts to the next level.”

Commenting on the outlook for 2020, the company said it was very encouraged about the demand environment.

“Wave Season has started on a strong note with overall rates higher than same time last year and booked load factors ahead of same time last year on a like-for-like basis. The company’s new ships and new attractions are a major driver not only of revenue, but of the strength of its brands,” the cruise major added.

“Demand for the core products is very strong across all quarters. Recent geopolitical events such as the brushfires in Australia and unrest in the Middle East have impacted demand for certain itineraries, but the strength of the core products has more than compensated.”

The company expects a net yield increase in the range of 2.25% to 4.25% in constant-currency and 2.5% to 4.5% as-reported for the full year.

Royal Caribbean is scheduled to introduce four new ships during 2020, which are set to bring in a more significant yield growth in the second half of the year than in the first half.

“Our yield outlook for 2020 is very encouraging with higher pricing on top of an exceptional 2019 performance,” said Jason T. Liberty, executive vice president and CFO.

“It’s clear that the Coronavirus will impact revenue in China in the short term, but we are a long-term business and our plans to continue growing this profitable market remain unchanged. We are also very excited about the introduction of our 20>25 by 2025 goals. Our formula for success is simple and our path towards our EPS goal is driven by moderately growing our yields, effectively managing our costs and moderately growing our business.  Meanwhile, our emissions target, which is one of our many sustainability initiatives, will further focus our world-class design, engineering and operations teams to meaningfully improve our environmental impact.”

The company has now canceled 8 cruises out of China ending March 4^th, and also modified certain itineraries in the region which overall have an estimated impact of USD 0.25 per share.

Royal Caribbean Cruises operates four brands: Royal Caribbean International, Celebrity Cruises, Azamara and Silversea Cruises.  The company is also a 50% joint venture owner of the German brand TUI Cruises and a 49% shareholder in the Spanish brand Pullmantur Cruceros.

Together these brands operate a combined total of 61 ships with an additional 17 newbuilds on order as of December 31, 2019.