Royal Caribbean Reports Second Quarter Results
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Royal Caribbean Reports Second Quarter Results
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Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2009-07-30
Royal Caribbean Cruises Ltd. (NYSE: OSE; RCL) today announced earnings for the second quarter of 2009 and provided updated guidance for the third quarter and full year.
Key Highlights
* Second quarter 2009 net loss was $35.1 million, or $0.16 per share, compared to net income of $84.7 million, or $0.40 per share in 2008. The results were consistent with the company's most recent disclosures.
* Net Yields for the second quarter decreased 17.9% versus 2008 and declined 14.2% on a constant dollar basis.
* Net Cruise Costs per APCD ("NCC") for the second quarter decreased 11.5% versus 2008 and declined 8.5% on a constant dollar basis. NCC, excluding bunker for the second quarter declined 8.4% versus 2008 and declined 4.7% on a constant dollar basis.
* Earnings per share ("EPS") are expected to be between $0.95 and $1.00 in the third quarter and between $0.70 and $0.80 per share for the full year.
* The company projects net yields to decline approximately 18% in the third quarter and approximately 14% for the full year. On a constant dollar basis net yields are projected to decline 15% - 16% in the third quarter and 11% - 12% for the full year.
* The H1N1 virus impacted EPS by approximately $0.05 in the second quarter and is expected to have a $0.18 and $0.27 impact on the third quarter and full year, respectively.
"Obviously, the economy continues to be a challenge and the impact from the publicity surrounding H1N1 has been very frustrating," said Richard D. Fain, chairman and chief executive officer. "However, the demand environment has shown remarkable stability and, with the extraordinary performance of our newest vessels and easier comparables, we look forward to improving yields in 2010. In the meantime, we remain vigilantly focused on cost management and liquidity," Fain continued.
Second Quarter 2009 Results
Royal Caribbean Cruises Ltd. today announced a net loss for the second quarter 2009 of $35.1 million, or $0.16 per share, compared to net income of $84.7 million, or $0.40 per share, in 2008. The loss included approximately $0.05 per share from the impact of the H1N1 virus and approximately $0.11 from non-operating expenses related to foreign exchange adjustments and hedging ineffectiveness.
Revenues were $1.3 billion, versus $1.6 billion in the second quarter of 2008. Net Yields decreased 17.9% from the prior year and declined 14.2% on a constant dollar basis. The H1N1 virus had a negative impact on yields of approximately one percentage point.
NCC decreased 11.5% from the prior year and 8.5% on a constant dollar basis. NCC, excluding fuel declined 8.4% from the prior year and 4.7% on a constant dollar basis.
Fuel costs benefited from reductions in at-the-pump pricing and continued energy reduction initiatives and were $6 million better than the amount included in the April guidance. Fuel consumption was 297.4 thousand metric tons at an average cost of $459 per metric ton.
H1N1 Impact
The impact of the H1N1 virus was somewhat higher than originally estimated and included: itinerary modifications and reduced demand for Royal Caribbean International vessels that visit Mexican ports; a decision to delay the launch of Pullmantur's Pacific Dream as a new product targeting Mexican nationals until 2010 and a significant reduction in Pullmantur's tour capacity in Mexico. Pullmantur's Ocean Dream subsequently had two voyages disrupted due to an H1N1 infection among some of its crew members and the vessel has experienced reduced demand as a result of the publicity in Spain.
The company summarized the impact of H1N1 as follows, $0.13 per share due to cancelled voyages and tours; $0.05 per share resulting from changes to itineraries and an estimated $0.09 per share due to reduced demand specifically related to Pullmantur's Ocean Dream and Royal Caribbean International's Mexican itineraries.
Recognizing that Pullmantur is reported on a two-month lag, the company estimated that the impact of the H1N1 virus will be approximately $0.18 per share in the third quarter, $0.04 in the fourth and $0.27 for the full year.
The impact of the H1N1 virus on net yields will be slightly more than two and one-half percentage points in the third quarter, around one-half of a percentage point in the fourth quarter and slightly more than one percentage point for the full year.
Revenue Environment
Aside from the products directly impacted by the H1N1 virus, the company reported that summer bookings have been stable for all products and source markets, with the exception of Spain. "Consumers are continuing to book their vacations very close-in," said Brian J. Rice, executive vice president and chief financial officer, "but we are seeing healthy volumes and have even been able to take some measured price increases for several of our peak season sailings."
The company also reported that new bookings for the fall have recently begun to outpace the same time last year; however booked load factors and pricing remain behind last year's levels. "Given the new booking cycle there is still uncertainty about the fall season. However, the same patterns we have seen all year seem to be developing for the fall," Rice continued.
Commenting on the first quarter of 2010 bookings, Rice said, "With slightly more than 1/3 of our inventory sold at levels well above where we ended the first quarter of '09, we are encouraged that the strength of our new ships coupled with a continued stable booking environment can provide the platform for improving yields."
The company projects net revenue yields to decline approximately 18% in the third quarter and down approximately 14% for the full year. On a constant dollar basis net revenue yields are projected to decline 15% - 16% in the third quarter and approximately 11% - 12% for the full year.
Expense Guidance
NCC are forecasted to decrease approximately 10% for the year and approximately 11% for the third quarter. On a constant dollar basis NCC are forecasted to decline 9% to 10% in the third quarter and 8% to 9% for the full year.
Excluding fuel, NCC are expected to decline 6% to 7% for the year and approximately 5% for the third quarter. On a constant dollar basis NCC, excluding fuel are forecasted to decline approximately 3% in the third quarter and 4% to 5% for the full year.
Fuel Expense
The company does not forecast fuel prices and its cost calculations are based on current at-the-pump prices net of hedging impacts. Based on today's fuel prices the company has included $591 million and $145 million of fuel expense in its full year and third quarter 2009 guidance, respectively.
The company is currently 49% hedged for the third quarter and 50% for the full year. Because of the relatively low fuel prices available, the company has recently increased its hedges in 2010 to 50% and has hedged approximately 45% of forecasted 2011 consumption.
Third Quarter 2009 Full Year 2009
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Fuel Consumption 315,000 mt 1,220,000 mt
Fuel Expenses $ 145 Million $ 591 Million
Percent Hedged (forward
consumption) 49% 50%
Impact of 10% change in fuel
Prices $ 7 Million $ 15 Million
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