Kloster Cruise reported profits of $2.5 million from ongoing operations in the second quarter ended June 30, 1992, compared to a loss of $17.8 million the second quarter last year.

In addition, Kloster Cruise also realized a gain of $14.7 million in the second quarter from the sale of the Sunward.

For the first six months of 1992, Kloster posted a loss of $200,000 following a first quarter loss of $2.7 million, compared to a loss of $36.2 million in the first six months of 1991.

"Favorable Development"

According to a statement from Vard, parent company to Kloster Cruise, "the $2.5 million profit indicates that cruise operations continue to develop favorably, although the results remain less than satisfactory."

The statement said that Royal Viking Line showed the most improvement during the six month period; Royal Cruise Line, which saw its capacity increase by approximately 50 percent, carried fewer passengers than expected; and bookings for Norwegian Cruise Line were somewhat weaker than expected. The statement also said that bookings made for NCL at the end of 1991 and the beginning of 1992 were, and still are, affected by the U.S. recession.

Vard expects earnings to improve further for the third and fourth quarters of 1992, and described the outlook for 1992 and 1993 as "promising."

IPO

Preparations for an Initial Public Offering (IPO) in the United States are underway and plans call (or an IPO later this year or early next year, according to Vard.

Market Reaction

In light of previous statements from Vard that 1992 would be "the best year that Kloster Cruise has ever had," the Norwegian stock market reacted to the second quarter report by sending Vard shares to NOK 59 compared to NOK 80.50 earlier this month.

While Vard executives were not available for comment, Trygve Hegnar, CEO of Kloster Cruise, last week told the Norwegian press that he expects a much better third quarter. Analysts here agreed, but added that the traditionally difficult fourth quarter could be a different story.

While the first six months show a clear recovery for Kloster Cruise, it still may have a ways to go before it can put Vard solidly in the black.

Vard

For the first six months, the Vard Group showed a significant improvement in earnings from operations of approximately $35 million on operating revenues of approximately $450 million compared to a loss of about $6 milllion on operating revenues of approximately $420 million in 1991. Operating revenues were up nearly 8 percent for the first six months of 1992 compared to 1991, while operating expenses declined by 2.5 percent.

(Vard's Consolidated Profit and Loss Statement is presented in Norwegian currency, NOK, but this newsletter took the liberty of converting from NOK to USD at the rate of NOK 6 to one dollar. Thus, the dollar amounts listed above and below are approximated.)

At the half-year mark Yard's long term debt is approximately $750 million compared to nearly $1 billion a year ago. Ships are valued at approximately $1.3 billion compared to nearly $1.6 billion a year ago.

For the first six months of 1992, Vard also posted a loss of approximately $16.5 million from the sale of the Sunward; interest income was listed at approximately $666,500 compared to $4 million last year; interest expenses were listed at approximately $39 million compared to $42 million last year; other financial items were $40 million this year compared to $24 million last year. The result was a loss of approximately $21 million this year compared to $32 million last year.

The loss is attributed mainly to interest payments and the sale of the Sunward. The Sunward had been carried on Vard's books on the basis of an unusually high currency exchange rate of NOK 9.10 from 1984, while the rate at the time of the sale was a "normal" NOK 6.30.

Long term debt totals approximately $750 million and comprises 77 percent of total capitalization, compared to 47 percent for Carnival Cruise Lines; and 73 percent for Royal Caribbean Cruise Line.