Carnival Corporation & plc reported net income of $252 million, or $0.32 diluted EPS, on revenues of $3.2 billion for its second quarter ended May 31, 2010. Net income for the second quarter of 2009 was $264 million, or $0.33 diluted EPS, on revenues of $2.9 billion.
Carnival Corporation & plc Chairman and CEO Micky Arison indicated that operating results for the second quarter 2010 exceeded the company's March guidance as a result of better than expected net revenue yields and cost reductions.
Commenting on the second quarter, Arison said, "We were encouraged to see revenue yields turn positive for the first time since late 2008. Improving revenue yields combined with an 8 percent capacity increase and ongoing cost control efforts offset significantly higher fuel prices." Increased fuel prices negatively impacted earnings by $0.20 per share during the quarter.
Key metrics for the second quarter of 2010 compared to the prior year were as follows:
• On a constant dollar basis net revenue yields (net revenue per available lower berth day) increased 2.0 percent for 2Q 2010, which was at the higher end of the company's March guidance, up 1 to 2 percent. Net revenue yields in current dollars increased 2.4 percent due to favorable currency exchange rates. Gross revenue yields increased only 0.4 percent in current dollars driven by lower air transportation revenue.
• Excluding fuel, net cruise cost per available lower berth day ("ALBD") declined 4.9 percent in constant dollars, which was better than March guidance, down 3.5 to 4.5 percent.
• Including fuel, net cruise costs per ALBD increased 4.2 percent on a constant dollar basis (increased 4.9 percent in current dollars). Gross cruise costs per ALBD increased 1.6 percent in current dollars.
• Fuel prices increased 64 percent to $498 per metric ton for 2Q 2010 from $304 per metric ton in 2Q 2009 but was lower than March guidance of $511 per metric ton.
Continuing with its strategic growth initiatives, the company took delivery of two new ships during the second quarter - P&O Cruises' 3,100-passenger Azura and The Yachts of Seabourn's 450-passenger Seabourn Sojourn. In addition, contracts were finalized with Fincantieri for the construction of two Princess Cruises' 3,600-passenger ships for delivery in May 2013 and 2014.
Since March, booking volumes for the second half of the year have been running slightly ahead of the prior year at higher prices. At this time, cumulative advance bookings for both quarters are at higher prices (constant dollars) with occupancies for the third quarter in line with the prior year and for the fourth quarter slightly behind last year.
Arison noted, "Considering recent global economic concerns and other world events our advance bookings are holding up reasonably well and remain in line with our expectations. We believe this will lead to earnings growth in both the third and fourth quarters. The summer season, which is our strongest and most important quarter of the year, is shaping up particularly well."
The company continues to expect full year net revenue yields, on a constant dollar basis, to increase 2 to 3 percent, in line with its March guidance. However, currency exchange rates have moved significantly since March guidance was provided. As a result, the company now expects net revenue yields on a current dollar basis to be approximately flat for the full year 2010 compared to 2009.
The company expects net cruise costs excluding fuel per ALBD for the full year 2010 to be down 2.5 to 3.5 percent on a constant dollar basis which is slightly better than its March guidance. Since March guidance, unfavorable changes in currency exchange rates have reduced earnings by $97 million. This has essentially been offset by a $41 million benefit from a decline in the spot price for fuel and lower forecasted costs for the remainder of the year.
Consequently, the company continues to forecast full year 2010 fully diluted earnings per share to be in the range of $2.25 to $2.35, compared to 2009 earnings of $2.24 per share. Based on the current spot price for fuel, fuel costs for all of 2010 are expected to increase $440 million compared to 2009, costing an additional $0.55 per share.
Third Quarter 2010
Third quarter constant dollar net revenue yields are expected to increase 5 to 6 percent (flat to up 1 percent on a current dollar basis) compared to the prior year. Net cruise costs excluding fuel per ALBD for the third quarter are expected to be 1 to 2 percent higher on a constant dollar basis (down 2 to 3 percent on a current dollar basis). Fuel costs for the third quarter are expected to increase $74 million compared to the prior year, costing an additional $0.09 per share.
Based on the above factors and using current fuel prices and currency exchange rates, the company expects earnings for the third quarter of 2010 to be in the range of $1.43 to $1.47 per share, compared to $1.33 per share in 2009.
During the second half of the year two new ships will debut in Europe- Holland America Line's 2,106-passenger Nieuw Amsterdam, and Cunard Line's 2,092-passenger Queen Elizabeth- furthering the company's strategy to expand its global presence. These vessels will be the fifth and sixth ships the company will introduce in 2010.