Carnival 4th Qtr Earnings Down
Carnival Splendor Fire Takes It's Toll
By Mike Groves
‘Carnivore Corp', as I like to call them, are certainly not having it easy this year and will probably be at the front of the queue at the New Year celebrations, overjoyed to finally see the back of 2010.
The year has been akin to a Shakespearian play, filled with periods of woe and tribulations for the cruise company. In February Carnival Miracle head-butted the pier in St Kitts and which was soon followed by yet another pier collision on February 26, this time involving the Costa Europa. Tragically causing three crewmembers to lose their lives when the vessel took on water.
In April some idiot on board the Carnival Ecstasy swerved to avoid a small buoy? 'Well that’s what they keep telling us but we all think they almost drove the thing up the beach on a remote island'. One hell of a way to order a cocktail! This idiotic move caused 60 passengers to suffer numerous injuries, some serious, and those are just the passengers that we know of. In July the company had to suffer the indignation of watching President Obama sign the Cruise Vessel Security and Safety Act 2009into law. They tried in vain to stop it through CLIA but lost! Then in August there was a serious public disorder incident on board the Carnival Dream.
What else was there?….'No No don’t tell me, it’s on the tip of my tongue – I'm sure it's something that they've done befo…GOT IT!!' their cruise ship the Costa Classica collided with a large barge up the Yangtze and which ‘Costa-lot’ of money for them. See I knew I would get it.
The company is now complaining that the recent ‘extensive’ fire on board the Carnival Splendor will reduce fourth-quarter earnings per share by one-fifth, with the ship likely to be out of service until the New Year.
The company announced on Tuesday that the ship would undergo extensive repairs and return to the water on January 16. Depending on the real extent of the damage inside, we shall have to wait and see if that is achievable ?
The Carnival Splendor fire could not have come at a worse time for the company, who have already seen profit margins slip this year and operating costs increase. Well you would wouldn't you, when you keep trying to sink your own ships and park a fourth at the beach bar! ‘Alabama Slammer’ to go please!
So lets study the current state of play in respect of finances – lets do the maths!
The immediate aftermath of their announcement saw Carnival shares fall 73 cents to $41.39 in morning trading at one point this week. But prior to this, they had already reported a drop in profits in their recent 10-Q (Quarterly Report) submitted to the United States Securities and Exchange Commission for the quarterly period ending August 31, 2010.
Revenues and Expenses highlighted the following, albeit these are not the full accounts available -
Revenues
Cruise passenger ticket revenues increased by $272 million to $3.4 billion in 2010 from $3.1 billion in 2009. Over 76% of 2010 total revenues are comprised of cruise passenger ticket revenues.
Onboard and other cruise revenues increased by $22 million.
Cruise passenger ticket revenue increase was partially offset by the impacts of a stronger U.S. dollar against the euro and sterling compared to 2009, which accounted for $135 million, and lower air transportation revenues due to fewer guests purchasing their air travel through the company.
Costs and Expenses
Operating costs and expenses increased $62 million to $2.3 billion in 2010 from $2.2 billion in 2009.
This increase was primarily caused by a 6.2% capacity increase in ALBDs*, which accounted for $130 million, $57 million of higher fuel prices and the $41 million MNOPF expense - they had to top up a pension scheme basically.
Selling and administration expenses of $381 million were flat in 2010 compared to 2009 and depreciation and amortization expenses increased $19 million
In addition to actual construction and fit out costs for Carnival Splendor, the company will also have to shelve out for canceled trips that the ship was scheduled to make, including refunding passengers in full for their cruise fare and air-travel costs. They will also have to send the vast majority of officers and crew home, pay their salaries; as per the terms of current contracts and then pay for their return flights in the new year. In short this will costs the company more millions and which can only lead to further drops in profits and unnerve shareholders.
Maybe if the company stopped 'cutting corners' and increased their focus on safety, then these continual accidents; fire, collisions and fast swerves would instill more confidence from both their revenue source (their passengers) and shareholders?
Carnival have stated that passengers will receive a 25% discount on a future cruise which sounds nice but it reality doesn't’t pay for the inconvenience of a lost vacation, those passengers still being required to take that period off work as planned but now sitting in their lounge and not on board the Splendor.
Carnival said the canceled trips and repairs would cost seven cents per share.
The Carnival Splendor left Long Beach, California for a 7-day cruise however she soon suffered critical damage when a major fire broke out in the engine room, leaving her adrift off the coast of Mexico. 4,500 passengers and crew had to endure backed -up toilets, limited water and food stocks with the U.S Navy flying in additional supplies at one point. In PR terms it was disastrous for Carnival but did any of the top team turn out to help, it does not appear so?
*ALBDs (“net revenue yields”) is a standard measure of passenger capacity for the period, which cruise industry use to perform rate and capacity variance analyses to determine the main non-capacity driven factors that cause our cruise revenues and expenses to vary. Net revenue yields are commonly used in the cruise industry to measure a company’S cruise segment revenue performance and for revenue management purposes.
+Alabama Slammer Cocktail Ingredients
1 shot southern comfort
1 shot lazaretto
1/2 shot sloe gin
splash lemon juice
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Carnival Suffer Losses In Fourth-Quarter Earnings
Company ‘Fat Cats’ cry into their Caviar and Champagne
By Mike Groves QGM
Cruise Bruise Security And Safety Advisor
November 24, 2010
