Carnival’s Q3 profit rises, but storm clouds are on the horizon

Carnival Corp. reported higher third quarter-net income, but reduced its outlook for the 2019 fiscal year and said that business in Europe and the U.S. had eroded since it last reported results three months ago.

Reacting to the mix of news, investors pushed Carnival shares down 7% in mid-morning trading on Thursday.

Carnival said net income for the quarter ended Aug. 31 was $1.78 billion, up from $1.71 billion a year earlier, while revenue rose to $6.53 billion from $5.84 billion.

Carnival also reported higher earnings adjusted for nonrecurring factors, but forecast that earnings for the full year would fall in the range of $4.23 to $4.27 a share, compared to a previous range of $4.25 to $4.35 put forth in June and actual results of $4.26 a share in 2018.

Carnival blamed higher anticipated fuel prices for the reduction.

“We achieved additional cost improvements largely driven by leveraging our scale, offsetting the earnings impact due to voyage disruptions from the combined impact of Hurricane Dorian, the tensions in the Arabian Gulf and the delayed delivery of Costa Smeralda,” Carnival CEO Arnold Donald said in a statement.

“A further reduction in guidance for ticket and onboard revenue worth 6 cents per share in part contributed to by the high level of close-in voyage disruptions was also offset. However, due to an 8 cent a share impact from the recent spike in fuel prices caused by geopolitical events, we are reducing our full-year guidance for 2019 by 5 cents a share,” Donald said.

Carnival said it expects it’s North America and Australia segment yields to be up for the year, but slightly less than previous guidance while its Europe and Asia segment is still expected to be down for the year but slightly more than previous guidance.

It also said: “Cumulative advanced bookings for the first half of 2020 are ahead of the prior year at prices that are in line compared to 2019 on a comparable basis. Since June, both booking volumes and prices for the first half of next year have been running lower than the prior year.”

By mid-afternoon Thursday, Carnival shares were trading at $44.14, off 8.2% from Wednesday’s close.

Cruise Lines Could Face Major Drydock Challenge Following Hurricane Damage

Grand Bahama Shipyard

The cruise industry could be looking at a monumental impact to their operations following Hurricane Dorian if the Grand Bahama Shipyard’s capacity is taken offline or further limited following an April incident.

The go-to-yard for drydocks and refurbishments in the cruise industry is partly owned by both Carnival Corporation and Royal Caribbean Cruises.

It is ideally located in the Bahamas, meaning little out-of-service transit time on the way to or from various deployment regions, including the Caribbean in the winter.

The yard is regularly used by cruise vessels from almost all cruise lines for mandatory class drydocking and refurbishment work.

There are few alternatives for big vessels in the region. Shipyards in Newport News, Virginia, and Mobile, Alabama, both have facilities that can handle larger vessels but are generally used for naval purposes and are known to be well booked ahead of time.

Deytens, located in South Carolina, has also played host to the expedition and luxury ships and mid-sized vessels over the years.

Costs at U.S.-based facilities are also higher, and there are challenges in bringing in skilled labour and large amounts of the hotel and marine supplies from foreign countries that are needed for large scale refurbishments, which often see spending of up to $3 million per day in supplies and labour.

With reported widespread damage in Freeport, operations to the yard could be impacted. Housing both permanent and temporary workers could prove challenging unless accommodation vessels are brought in.

Another expensive option could be the Boka Vanguard, a semi-submersible heavy transport vessel operated by Netherlands-based Boskalis, which helped provide a platform for emergency repairs to the Carnival Vista earlier this year.

In Curacao, Damen Shipyards offers a drydock option and has plenty of cruise experience.

Cruise lines could also choose to wet-dock their vessels at industrial piers just about anywhere. The upside being the vessel would be empty and available for hotel refit. Crane access could be limited making logistics of getting supplies off and on the ship challenging.

However, classification societies require ships to come out of the water at regular intervals for inspection.

The most likely option, however, is the regular drydock facilities in Europe. The question is whether they have available space when needed, and the impact of moving ships that were scheduled to drydock in the Bahamas to Europe, mixing up some itineraries and deployment.

Cancelling a scheduled drydocking for the third or fourth quarter of 2019 or early 2020 and replacing it with a normal sailing would also pose challenges with a short booking window.

Carnival and Arison’s Pledge $2 Million for Hurricane Relief

Carnival Sunshine

Carnival Corporation today announced that the corporation’s philanthropic arm, Carnival Foundation, and its nine global cruise line brands together with the Micky and Madeleine Arison Family Foundation have pledged to donate $2 million in funding and in-kind support for relief efforts in The Bahamas following Hurricane Dorian, according to a press release.

Carnival Foundation and the company’s nine cruise line brands are pledging a total of $1 million in monetary and in-kind donations in support of immediate relief and recovery efforts in The Bahamas.

Carnival Corporation Chairman Micky Arison and his wife Madeleine are matching the corporation’s commitment with a $1 million donation from the Micky and Madeleine Arison Family Foundation.

“We are fully committed to supporting the critical relief and recovery efforts already underway for The Bahamas, and we are working closely with officials and affected communities to identify the needs for support and assistance,” said Arnold Donald, CEO of Carnival Corporation. “Our company has always been closely tied to The Bahamas with a rich history spanning many years, so it’s heartbreaking to see the impact of Hurricane Dorian, and our thoughts and prayers are with the people of The Bahamas. We have long admired the unyielding spirit of the Bahamian people and have no doubt they will overcome, rebuild and recover, and we look forward to supporting their efforts.”

A portion of the combined pledge will immediately go to support efforts being managed by Direct Relief, an international humanitarian organization that provides critical medications and supplies during emergency situations. Direct Relief is currently assembling and delivering requested medical aid and additional emergency medical caches with first-aid supplies to the affected areas in The Bahamas.

In addition, Carnival Corporation and its brands are working together with local officials, community leaders and key relief and recovery organizations to identify the most timely and urgent relief needs and immediate allocations for additional funds and support.

Separately, the company today announced an effort to collect and deliver food and supplies donated in Broward, Miami-Dade and Palm Beach counties for the people of The Bahamas, through a partnership with Tropical Shipping and The Bahamas National Emergency Management Agency (NEMA). The effort, funded by Carnival Corporation and Tropical Shipping, will work in partnership with NEMA to provide immediate assistance to the people of the Bahamas where it is most needed.