Carnival Corporation reported second quarter 2013 earnings on Tuesday, posting net income of $72 million compared to $159 million earned in the same quarter a year ago.
Net revenue yields were down nearly 2 percent in the second quarter this year, versus the same period in 2012. Gross revenue yields decreased 3.1 percent in the same quarter year-over-year.
It appears Carnival Triumph’s unexpectedly planned drydock and repairs from a fire earlier in the year took their toll on expenses. Net cruise costs excluding fuel increased 8.8 percent; the company cited the timing of dry-dock expenses, vessel repair costs and non-recurring items that benefitted earnings in the previous year as reasons for that expense increase.
Fuel prices were down 9.7 percent and fuel consumption down 5.7 percent. By year end, the company expects to achieve a 23 percent cumulative reduction in its fuel consumption since 2005.
Highlights in the quarter? Carnival Corp. cited $115 million in upgrades and repairs to Carnival Triumph, which is now sailing once again; the christening of Princess Cruises’ 3,560-passenger Royal Princess, the first of a new class of ship; and the completion of Carnival Sunshine’s $155 million modernization program.
Looking forward, Carnival Corp. said in its earning statement that “cumulative advance bookings for the remainder of 2013 are behind the prior year at prices below the prior year levels.”
That said, since late March, fleet-wide booking volumes for the next three quarters, excluding Carnival Cruise Lines, are running higher than the prior year and at higher prices. In turn, booking volumes for Carnival Cruise Lines during the same period are running behind the prior year at lower prices.
“Our 90,000 global team members are dedicated to delivering an outstanding vacation experience to 10 million guests each year,” said Micky Arison, chairman and CEO, Carnival Corp. He added that the level of quality, variety and innovation available throughout the company’s fleet has never been greater. He said “guests are reaping the benefits of truly exceptional vacation values.”
Arison said the company will work to more broadly communicate that message through stepped up consumer and trade marketing efforts and strengthened engagement of our travel agent partners. “We believe these initiatives, combined with slower supply growth, will lead to increased yields,” said Arison
That falls in line with the company’s recent confirmation that Bob Dickinson, former Carnival Cruise Lines president and CEO, will reengage with the line’s brands as a marketing consultant – helping them to better tap into the agency community by enhancing trade marketing.
Carnival Corp. said its full year net revenue yields will likely dip 2-3 percent and full year net cruise costs excluding fuel to be 3.5-4.5 percent higher compared to the prior year.
Arison To Shed CEO Role, Remain Chairman
But in even bigger news, after the earnings report was released, the company said Arison will shed his CEO responsibilities for the corporation. Effective July 3, Arnold W. Donald, an experienced business leader who has served on the company's board for the past 12 years, will become CEO.
In his role as chairman, Arison will continue to provide board level oversight for the company and will remain the company’s largest shareholder. Under Arison’s leadership, Carnival Corp. has grown sizably -- now operating more than 100 ships, carrying 10 million passengers a year and generating more than $15 billion in annual revenues.
Arison has other business interests as well; he is the owner of the 2013 NBA championship team, the Miami Heat.
Arison became CEO in 1979. At that time the company was privately held and operated three cruise ships under one brand, generating $44 million in revenues and carrying approximately 160,000 passengers a year. By 1987, Carnival Cruise Lines had become the world’s largest cruise operator and Arison took the company public.
Working in partnership with current vice chairman and COO Howard Frank, Arison led the company through an aggressive expansion that included the acquisition of several well-known cruise brands, including Holland America Line, Costa Cruises, Cunard and Seabourn.
In 2003, a merger between Carnival Corporation and P&O Princess Cruises plc – comprised of Princess Cruises, P&O Cruises (UK), P&O Cruises (Australia), and German cruise brand AIDA – was completed, creating the first global cruise operator and one of the largest leisure travel companies in the world. In addition, the company undertook an ambitious schedule of new ship introductions.
The company said Donald, in his new role, will lead the executive team, initially focusing on achieving the company’s long-term strategic goals while working directly with the operating brand executives.
Frank will continue to serve in his current role as vice chairman and COO of the company, supporting Donald in working with the corporate level executive team. The move has received unanimous approval from the company’s nominating and governance committee as well as the full board of directors.
“I have been discussing this with the board for some time now and feel the timing is right to align our company with corporate governance best practices and turn over the reins after 34 years as CEO,” said Arison. “Arnold is an exceptional professional with extensive experience in organizational leadership who will bring a fresh perspective to the company."
Arison said he valued and relied on Donald's judgment and insight and was confident in Donald's ability to move the organization forward. “As chairman, I will still be working closely with Arnold to ensure a great future for all our stakeholders," Arison said.”
Donald’s career includes numerous global leadership roles including those with a large publicly traded company, private equity firms, governmental appointments and large not-for-profits as well as serving on boards of directors on companies across many business sectors. He has a strong working knowledge of the cruise business gained through 12 years serving on the Carnival board.
Donald also founded and led Merisant, a company whose products include tabletop sweetener brands Equal and Canderel. He also held multiple senior management roles at Monsanto over the course of 20-plus years, including president of the company’s consumer and nutrition sector and president of its agricultural sector.
Additionally, Donald is former president and CEO of the Executive Leadership Council, a professional network and leadership forum for African-American executives of Fortune 500 companies. He will continue to serve on Carnival’s board of directors but will relinquish his committee roles.
“I am honored and privileged to have this opportunity to lead the next stage of growth for Carnival Corporation & plc,” said Donald. “As a board member, I have come to know Micky, Howard and the company well. I have a first-hand appreciation of what it has taken to develop this highly successful business, an understanding for the dynamics and challenges we face, and a great deal of confidence in the company’s management team and their ability to execute."
Donald said he has enormous respect for Arison, whom he called a "a visionary in the cruise industry." He also said he looks forward to working with the company’s many stakeholders including 90,000 employees, 10 million guests, thousands of travel agent partners, vendors and shareholders around the globe.