Kloster Cruise Limited has reported a net loss of $15.8 million on revenues of $190 million for the second quarter ended June 30, 1995 compared to a net income of $17.8 million on revenues of $219.9 million for the second quarter of 1994.
Last year, however, the company benefited from a $35.1 million profit from the sale of the Royal Viking Sun and absorbed an $8.2 million loss on the translation of foreign currency denomination debt.
According to a prepared statement, earnings eroded in 1995 primarily because of revenue weakness at Royal Cruise Line, and because the company operated less capacity due to the sale of three older vessels, as well as an unusually high, although planned, number of vessels in routine drydock.
After a weak winter and spring season, RCL emerged in June with occupancies and rates above those of June in the prior year, according to the statement. Summer season advance bookings are also stronger than those for last year, even after being adjusted for capacity increases.
The company's Norwegian Cruise Line division continued to show occupancy and rate improvements year-over-year, according to Kloster, with occupancy rising by 3.7 points and yields (defined as revenue per available capacity day) improving by 10.7 percent.
Kloster reported 804,058 passenger cruise days for the second quarter for a load factor of 96.8 percent compared to 934,300 passenger cruise days and a load factor of 94.5 percent for the same quarter last year.
According to the prepared statement, Kloster has also "unleashed an aggressive cost reduction program shipside and shoreside, the effectiveness of which will be felt more concretely in the second half of 1995."
(Unconfirmed reports suggest that the cost reduction program also includes pay cuts for ships' crew and staff.)
In the prepared statement, Adam Aron, Kloster Cruise President and Chief Executive Officer, said that "despite NCL whose performance has improved throughout the year and a now improving RCL, a generally weak market demand for cruising bas caused our competitors to launch price discounting initiatives which in many cases we have been forced to match - which taken together may serve to offset benefits of management's actions to increase revenues and reduce costs."
While the second quarter and six-month results were released, Aron was not available for comments and was said to be on one of the ships.
Six Month Results
For the first six months of 1995, Kloster Cruise reported a net loss of $32.9 million on revenues of $383.1 million compared to income of $4 million (including the sale of the Royal Viking Sun) on revenues of $444.9 million for the same period last year.
Kloster also reported 1,630,525 passenger cruise days and a load factor of 96.5 percent compared to 1,858,572 passenger cruise days and a load factor of 92.4 percent for the same period last year.
In 1995, Kloster Cruise operated nine vessels, whereas in 1994 the company operated 11 vessels. Three vessels were sold to modernize the fleet and "to exit the unprofitable luxury market," according to Kloster. In addition, in the second quarter, the company also had three vessels in drydock.
The company estimated that the combined effect represented a dampening in year-over-year earnings of approximately $3 million.
Kloster stated that for the year-to-date, excluding the non-cash effects of translation of foreign currency denominated debt, the gain on sale of assets, and other extraordinary items, the company's net loss was $24.9 million for the first six months of 1995, compared to a net loss of $16.4 million for the same period of 1994.
The company also stated that it estimated the decrease in capacity in 1995 and the drydockings to account for $5.3 million of the decline in profitability in 1995. Also, while actual interest expense was favorable due to decreased borrowings, higher interest rates also cost the company $5.3 million in 1995.
Kloster Cruise continues to struggle under a debt burden that siphons off earnings the company needs badly to build new ships in order to stay competitive.
Unconfirmed reports suggest that the new owner group at parent company VARD is asking lenders to sell their debt back to the company at a considerable discount and/or for postponement of debt service, providing the company with equity to build new ships.