Carnival 2012

Carnival Corporation executives provided a guarded outlook for 2012 in the company’s recent Q3 earnings call, in light of worldwide economic and geopolitical issues. Its earnings forecast for the full year is from $2.40 to $2.44 per share, compared to $2.40 to $2.50 for this year, and actual earnings of $2.47 last year.

Carnival reported net income of $1.3 billion, or $1.69 per share, on revenues of $5.1 billion for its third fiscal quarter ended Aug. 31, 2011, compared to net income of $1.3 billion, or $1.62 per share, on revenues of $4.5 billion for the same period last year.

Commenting on the results in a prepared statement, Micky Arison, chairman and CEO, said: “Cruise ticket prices for our peak summer season remained strong close to sailing driving a 2.6 percent yield improvement. Our North American brands performed well, achieving an almost 6 percent yield increase, while our European, Australian and Asian brand yields fell 2 percent due primarily to the geo-political unrest in the Middle East and North Africa.

On the cost side, excluding the Costa Marina and fuel, costs were up 2 percent over the prior year, driven by higher food, freight, crew travel and other hotel costs. Fuel costs were up 45 percent year-over-year. The company also posted a loss on the sale of the Marina from book value.

At press time, the company’s share price was fluctuating between $30 and $31 compared to a 52-week low/high of $28.52/$48.14.

New Ships

Just as shipyard executives were complaining that the cruise ship market was dead or at best zombie-like, two orders materialized, for one ship, plus an option, for TUI Cruises, going to STX Finland, and one more yacht-like ship for Compagnie du Ponant, going to Fincantieri. TUI ordered a 97,000-ton, 2,500-passenger ship for delivery in 2014. The company has an option on a second, which it said must be exercised within 12 months.

Neither TUI nor STX announced the building cost, which is assumed to be very attractive considering the market conditions. Ponant ordered a sister ship to the 264-passenger Le Boreal and L’Austral, which were also built by Fincantieri. It is slated to be delivered in 2013. The all-inclusive building cost was reported to be 100 million euro.

Battling for Orders

“We have come down from a booming market for cruise-ship building that reached its peak in 2007,” said Corrado Antonini, chairman of Fincantieri.          

He said that the future newbuilding pace will be more or less half of what it was in the past decade. Making the situation even tougher is the fact that the number of shipyards in the cruise market has increased, but the order volume has not.

In its Q2 report issued in late August, STX Europe said that the cruise and ferry market was improving, but remained challenging. That market description means that there are prospective projects, explained to Timo Suistio, executive vice president and COO at STX Finland and director of the Rauma shipyard. “The volume is low,” he added, “but the market is alive – it is not dead. And it also means that the price level on recent orders is very low.

The shipyards face two main issues, according to Jacques Hardelay, president of STX France: The reduced building pace, and as a consequence of that, the downward pressure on pricing as building capacity exceeds demand.

“The customers want to pay less for more complex ships,” he added.

For the full reports, please read the Oct. 6, 2011 edition of Cruise Industry News, the Newsletter, click here to subscribe.