Carnival Corporation Provides Business Update, Q1 Earnings

Posted on 22 March, 2022 by Spacejunkie2

Carnival Corporation has provided its first-quarter 2022 business update.

Highlights:

U.S. GAAP net loss of $1.9 billion and an adjusted net loss of $1.9 billion for the first quarter of 2022.
First-quarter 2022 ended with $7.2 billion of liquidity, including cash, short-term investments and borrowings available under the company’s revolving credit facility.
For the cruise segments, revenue per passenger cruise day (“PCD”) for the first quarter of 2022 increased approximately 7.5% compared to a strong 2019. This increase was driven by exceptionally strong onboard and other revenue.
As of March 22, 2022, 75% of the company’s capacity had resumed guest cruise operations.
The company expects to have each brand’s full fleet back in guest cruise operations for its respective summer season where it historically generates the largest share of its operating income.
The company believes monthly adjusted EBITDA will turn positive at the beginning of its summer season.
Since the middle of January, the company has seen an improving trend in weekly booking volumes for future sailings. Recent weekly booking volumes have been higher than at any point since the restart of guest cruise operations.
The company announced that three additional ships are expected to leave the fleet in 2022 in connection with its ongoing fleet optimization strategy. In total, this represents the planned removal of 22 smaller-less efficient ships since the beginning of the pause in guest cruise operations.
Building on the company’s strong governance framework and its continued commitment to sustainability, the Board of Directors appointed the company’s President and Chief Executive Officer Arnold Donald to the role of Chief Climate Officer.

First Quarter 2022 Results and Statistical Information

For the cruise segments, revenue per PCD for the first quarter of 2022 increased approximately 7.5% compared to a strong 2019. This increase was driven by exceptionally strong onboard and other revenue.
During the first quarter of 2022, as a result of the Omicron variant, the company experienced an impact on bookings for its near-term sailings, including higher cancellations resulting from an increase in pre-travel positive test results, challenges in the availability of timely pre-travel tests and the disruption Omicron caused on society overall during this time. Therefore, occupancy in the first quarter of 2022 was 54%, a 20% increase in guests carried over the prior quarter.
Available lower berth days (“ALBD”) for the first quarter of 2022 were 13 million, which represents 60% of total fleet capacity, increasing from 47% in the fourth quarter of 2021.

Carnival Corporation & plc President, Chief Executive Officer and Chief Climate Officer Arnold Donald noted: “Despite the impact of Omicron, guests carried grew by nearly 20 per cent in the first quarter compared to the prior quarter, while simultaneously increasing revenue per passenger cruise day and driving an improvement in adjusted EBITDA. We expect monthly adjusted EBITDA to turn positive by the beginning of our summer season as we build occupancy and return more ships to service.”

Donald added: “We believe we have positioned the company well to withstand volatility on our path to profitability and have been working hard to resume operations as a stronger and more sustainable operating company, to maximize cash generation and to deliver double-digit returns on invested capital over time.”

Despite the impact resulting from the Omicron variant during the first quarter, the company’s adjusted EBITDA (see non-GAAP Financial Measures) improved due to its ongoing resumption of guest cruise operations. The company believes that adjusted EBITDA will continue to improve with the ongoing resumption of guest cruise operations and continues to expect improvement in occupancy throughout 2022 until it returns to historical levels in 2023. The company believes monthly adjusted EBITDA will turn positive at the beginning of its summer season.

The company ended the first quarter of 2022 with $7.2 billion of liquidity, including cash, short-term investments and borrowings available under the revolving credit facility. The company invested $400 million in capital expenditures (net of export credit facilities) during the first quarter of 2022, which included the delivery of three of the four larger-more efficient ships expected to be delivered in 2022. In addition, the Company repaid $500 million of debt principal and incurred $400 million of interest expense, net during the quarter.

Carnival Corporation & plc Chief Financial Officer David Bernstein noted, “We ended the first quarter of 2022 with $7.2 billion of liquidity. Looking forward, we believe we remain well-positioned given our liquidity and the continued improvement expected in adjusted EBITDA, along with the expected build in customer deposits, as we progress toward resuming full fleet operations.”

Resumption of Guest Cruise Operations

Donald said: “Since resuming guest cruise operations, we delivered more than 2.2 million exceptional vacations while achieving historically high guest satisfaction scores. With 75 per cent of our capacity having resumed guest cruise operations, we are well on our way back to full cruise operations and we are planning to return the balance of the fleet by our summer seasons. Achieving these operational milestones while facing headwinds including Delta and Omicron variants and changing regulations and protocols —particularly at our scale— makes the efforts of our team, ship and shore, all the more impressive.”

Donald continued, “In addition, we furthered our fleet optimization efforts by taking delivery of three larger-more efficient ships during the quarter, Costa Toscana and AIDAcosma, the company’s fifth and sixth ships powered by LNG and Discovery Princess. We also announced the removal of another three smaller-less efficient ships, bringing the total to 22 ships, significantly reducing our rate of capacity growth. Upon returning to full operations, nearly 25 per cent of our capacity will consist of newly delivered ships, which we believe will expedite our return to profitability and improve our return on invested capital.”

As of March 22, 2022, 75% of the company’s capacity had resumed guest cruise operations as part of its ongoing return to service. The company’s enhanced COVID-19 protocols have helped it become among the safest forms of socializing and travel, with far lower incidence rates than on land. The company expects to have each brand’s full fleet back in guest cruise operations for its respective summer season where it historically generates the largest share of its operating income.

Upon returning to full cruise operations, the company’s ongoing fleet optimization strategy combined with its LNG efforts and other innovative initiatives to drive energy efficiency is forecasted to deliver a 10% reduction in fuel consumption per ALBD and a 9% reduction in carbon emissions per ALBD on an annualized basis compared to 2019.

While the company will benefit from the removal of smaller-less efficient ships and the delivery of larger-more efficient ships, the company expects adjusted cruise costs excluding fuel per ALBD (see Non-GAAP Financial Measures) for the full year 2022, to be significantly higher than 2019. This is driven by a portion of its fleet being in pause status for part of the year, restart related expenses, an increase in the number of dry-dock days, the cost of maintaining enhanced health and safety protocols and inflation. The company anticipates that many of these costs and expenses will end in 2022 and will not reoccur in 2023. Additionally, the company expects to see a significant improvement in adjusted cruise costs excluding fuel per ALBD from the first half of 2022 to the second half of 2022 with a low double-digit increase for the full year 2022 compared to 2019.

The ongoing resumption of the company’s guest cruise operations and the increased uncertainty given the current invasion of Ukraine, including its effect on the price of fuel, are collectively having a material impact on its business, including the company’s liquidity, financial position and results of operations. The company continues to expect a net loss for the second quarter of 2022 on both a U.S. GAAP and adjusted basis. However, the company expects a profit for the third quarter of 2022. For the full year of 2022, the company expects a net loss.

Update on Bookings

Donald added: “Given the recent strengthening in booking volumes coupled with the closer-in booking patterns, we expect an extended wave season. In fact, we gained occupancy even in the month of March with fleetwide occupancy nearing 70 per cent and several sailings already exceeding 100 per cent.”

Since the middle of January, the company has seen an improving trend in weekly booking volumes for future sailings. Recent weekly booking volumes have been higher than at any point since the restart of guest cruise operations.

During the first quarter, the company increased its booked occupancy position for the second half of 2022, albeit not at the same pace as a typical wave season due to the Omicron variant. As a result, cumulative advance bookings for the second half of 2022 are at the lower end of the historical range. However, the company believes it is well situated with its current second half 2022 booked position given the recent improvements in booking volumes and its continued expectation that occupancy will build throughout 2022 and return to historical levels in 2023. Normalized for bundled packages, prices on bookings for the second half of 2022 continue to be higher, with or without future cruise credits (“FCCs”), as compared to 2019 sailings.

Cumulative advanced bookings for the first half of 2023 continues to be both at the higher end of the historical range and at higher prices, with or without FCCs, normalized for bundled packages, as compared to 2019 sailings. (Due to the ongoing resumption of guest cruise operations, the company’s current booking trends will be compared to booking trends for 2019 sailings.)

Total customer deposits increased to $3.7 billion as of February 28, 2022, from $3.5 billion as of November 30, 2021.

Carnival Brands to Relax Covid Mask Wearing Protocols.

Posted on 21 February, 2022 by Spacejunkie2

Carnival Corporation has confirmed its cruise brands will opt into new US Centers for Disease Control and Prevention (CDC) Covid protocols when operating in the US.

From 1 March, masks will be recommended but not mandatory onboard Carnival Cruise Line, Holland America Line, Seabourn and Princess Cruises voyages, although they may be needed for certain venues and events.

Carnival Cruise Line said it will continue to meet the standard of vaccinated cruises, but children under five would not be included in any vaccinated guest calculation and will not be required to receive an exemption to sail. The brand said it would also allow “additional flexibility” in pre-cruise testing requirements.

President Christine Duffy said: “The public health situation has continued to improve, providing confidence about these changes. Our protocols will evolve as we continue to remain dedicated to protecting the public health of our guests, crew and the communities we visit.”

Princess president John Padgett added: “Princess has proven cruise vacations are safe and healthy for our guests and teams. Going forward, Princess is prepared to adjust operating protocols to ensure our guests have amazing vacations while always protecting the safety of our guests, team members and destinations.

“We appreciate the ongoing collaboration among multiple government agencies as well as the support of Alaska officials and other delegations.”

Carnival Corporation Driving Technical Innovation

Posted on 26 January, 2022 by Spacejunkie2

“Where there are particularly large refits or complex ones, we provide project management resources to support the brands,” said Chris Millman, vice president of corporate marine technology at Carnival Corporation.

Perhaps the biggest project coming up for Carnival Corporation is a battery system retrofit for AIDA Cruises, as the German brand will get a 10MW battery installation with the goal to manoeuvre into port, hook up to shore power, and then sail out of port, all with zero emissions.

“The impact of that will be zero emissions for a port call, which is something we are looking at,” Millman said, adding that a fuel cell installation was also happening in the near future on an AIDA vessel.

Long-term planning is centred around fewer emissions with the eventual goal of finding the zero-emissions fuel of the future.

Varying Projects

Many of the ideas and project topics come from the brands themselves, noted Mike Kaczmarek, vice president of corporate shipbuilding.

Thus, those projects can turn into company-wide refit projects, energy-efficiency initiatives and help lend resources and support to prototype future technologies.

“We have been running a technical prototype initiative whereby we are assessing the impact of different technologies on the ships,” said Millman, pointing to variable speed pumps, fan controllers, different hull coatings and LED lights.

“We’ve developed a recommended package for all our ships … it brings all the ships into line with technologies we’ve identified as being effective at improving energy efficiency and waste management,” he said.

After seeing the results of an air lubrication system on a pair of newbuilds, that technology has now been retrofitted to a handful of existing ships, where Carnival first equipped the ships with the fastest itineraries in the fleet that would benefit the most.

Hull Coating

““Following the pause period, and with ships returning to service, they needed hull cleaning and we needed to understand which ones needed it the most,” Millman explained.

New is a remote hull cleaning drone that also collects all the fouling of the hull, alleviating concerns from port authorities and letting Carnival evaluate what was on the hull.

With no shortage of hull coating options available, different water temperatures ship speeds and itinerary patterns, the company is constantly evaluating new hull paint.

Carnival ships are sailing globally with different hull coatings, and test patches of new coatings.

“In one case we coated a whole hull with completely new paint. It has proven to be very successful,” Millman said. “We haven’t seen it through to the end of five years yet but we are moving to do another couple of trials.”

Support

Supporting initiatives include a host of subject matter experts at the corporate level – whether it’s a hydrodynamics wizard, a waste heat genius or other top minds in specific fields.

“The background assistance is there for the brands,” said Millman.

Getting pitched all the time with the latest emissions-saving gadgets, the corporate technology team goes through potential projects, brings in subject matter help and then evaluates proposals.

“We would then prioritize what to trial depending on what we feel would bring the best ROI on improving energy efficiency,” Millman said. “Then run the trial and report back.”

Company-wide, a technical team gathers twice a year for two to three days, going through all the projects, providing updates and making decisions on where the future focus should go.

“The biggest (future) tech initiative will be on alternative fuels … that is a major way to decarbonization.”

Excerpt from Cruise Industry News Quarterly Magazine: Winter 2021-2022