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Carnival Reports Q2 2021 Earnings, Provides Business Update

Carnival Mardi Gras

Carnival Corporation has reported second quarter 2021 earnings and provided a key business update.

Highlights: 

  • U.S. GAAP net loss of $(2.1) billion and adjusted net loss of $(2.0) billion for the second quarter of 2021.
  • Second quarter 2021 ended with $9.3 billion of cash and short-term investments, which the company believes is sufficient liquidity to return to full cruise operations.
  • Customer deposits increased in the second quarter of 2021 compared to the previous quarter.
  • Cash burn rate in the first half of 2021 was better than forecasted primarily due to the timing of proceeds from ship sales and working capital changes.
  • 42 ships from eight of the company's nine brands either have resumed or are announced to resume guest cruise operations by November 30, 2021, which is over 50% of the company's capacity, with more announcements expected in the coming weeks.
  • Booking volumes for all future cruises during the second quarter of 2021 were 45% higher than booking volumes during the first quarter of 2021.
  • Cumulative advanced bookings for full year 2022 are ahead of a very strong 2019, despite minimal advertising or marketing.
  • Building on a legacy of ESG performance, the company announced its 2030 sustainability goals and 2050 sustainability aspirations, focusing strategically and holistically on enhancing its sustainable business model while reinforcing its commitment to and investment in sustainability solutions.
  • The company repriced its first-priority senior secured term loan facility, reducing its future annual interest expense by over $120 million per year and has approval in principle from the relevant export credit agencies to defer approximately $1.0 billion of principal payments, increasing its near term liquidity. The company expects these transactions to close during the third quarter of 2021 and continues to focus on pursuing additional refinancing opportunities to reduce interest rates and extend maturities.

Carnival Corporation & plc President and Chief Executive Officer Arnold Donald said: “We are working aggressively on our path to return our full fleet to operations by next spring. So far, we have announced that 42 ships, representing over half of our capacity, have been scheduled to return to serving guests by this fiscal year end. We are currently evaluating various deployment options with a focus on maximizing cash flow, while delivering a great guest experience and serving the best interests of public health.” More return to service announcements will be coming in the weeks ahead. Donald added. “We can’t wait to welcome all our valued guests and crew members back on board!”

Eight of the company’s nine brands either have resumed or have announced they plan to resume guest cruise operations by the company's fiscal year end, November 30, 2021, according to a press release.

27 ships, or approximately 35% of capacity, have resumed or are announced to resume by the end of the third quarter of 2021 and an additional 15 ships, or nearly 20% of capacity, are announced to resume by the end of the fourth quarter of 2021. Together these 42 ships represent over 50% of capacity.

Update on Bookings

Donald added: “Despite our minimal advertising spend, we continue to experience an acceleration in booking trends globally, including capturing significant latent demand for our new sailings this summer. This strong demand affirms confidence in our future. In addition, customer deposits grew this past quarter, a significant milestone on our path to resumption.

 "With the aggressive actions we have already taken to optimize our portfolio and reduce capacity, we believe we are well positioned to capitalize on pent up demand and to emerge a leaner more efficient company, reinforcing our global industry leading position.”

Booking volumes for all future cruises during the second quarter of 2021 were 45% higher than booking volumes during the first quarter of 2021, Carnival said in a statement.

Cumulative advanced bookings for full year 2022 are ahead of a very strong 2019 as of May 31, 2021. The company highlights that this level of bookings was achieved with minimal advertising and marketing. (Due to the pause in guest cruise operations, the company's current booking trends will be compared to booking trends for 2019 sailings.)

Total customer deposits as of May 31, 2021 and February 28, 2021 were $2.5 billion and $2.2 billion, respectively. During the quarter, customer deposits on new bookings exceeded the impact of refunds provided.

Liquidity and Refinancing

Carnival Corporation & plc Chief Financial Officer David Bernstein added: “We ended the second quarter with $9.3 billion of cash and short-term investments. We believe we have sufficient liquidity to get us back to full operations and continue to be focused on pursuing refinancing opportunities to reduce interest rates and extend maturities. To date, through our refinancing efforts, we have reduced our future annual interest expense by over $120 million per year and expect to increase our near-term liquidity by $1.0 billion.”

Donald added: "Once we return to full operations, our cash flow will be the primary driver of the company's return to investment grade credit over time, creating greater shareholder value."

The company's monthly average cash burn rate for the first half of 2021 was $500 million, which was better than forecasted primarily due to the timing of proceeds from ship sales and working capital changes, according to a press release.

This monthly average cash burn rate includes revenues earned on voyages, ongoing ship operating and administrative expenses, restart spend, working capital changes (excluding changes in customer deposits), interest expense and capital expenditures (net of export credit facilities), and excludes scheduled debt maturities as well as other cash collateral to be provided. As the company continues to resume guest cruise operations, it expects to incur incremental spend relating to bringing ships out of pause status, returning crew members to its ships and implementing enhanced health and safety protocols.

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