Carnival Corporation Reports Lower Income, Higher Revenues

Photo by Susan J. Young
Photo by Susan J. Young

Carnival Corporation has announced its fourth quarter and full year earnings. For the fourth quarter of 2013, U.S. net income was $66 million, or $0.08 diluted earning per share. That compares with $93 million, in net income or $0.12 in 2012. Revenues for fourth quarter 2013 were $3.7 billion compared to $3.6 billion for the prior year.
For the full year in 2013, the corporation's net income was $1.1 billion, or $1.39 diluted earnings per share compared to $1.3 billion, or $1.67 per share for the prior year. Revenues for the full year 2013 were $15.5 billion compared to $15.4 billion for the prior year.
Other highlights? Arnold Donald, Carnival Corporation's president and CEO, said fourth quarter earnings were better than the line had anticipated with its September guidance to financial analysts. He that that was due primarily to better than expected cruise ticket prices and onboard spending for Carnival Cruise Lines.
Donald added, “Accelerated progress in Carnival Cruise Lines’ brand recovery had a positive impact on fourth quarter results. A steady stream of innovative product initiatives, the launch of a nationwide marketing campaign and travel agent outreach program, as well as an industry-leading vacation guarantee fueled the brand’s improvement.” 
Carnival Cruise Lines doesn't typically do television advertising in the early fall, but given the demand fall-out after Carnival Triumph and other operational incidents early in the year, the line did so in 2013 to boost consumer demand. As a result, the line said net cruise costs excluding fuel increased 6.5 percent, driven by a higher advertising spend. Gross cruise costs including fuel increased 1.6 percent. 

The good news is that fuel prices themselves declined  6.3 percent for the fourth quarter - year over year. One metric ton of fuel cost $716 in fourth quarter 2012 versus $671 for the comparable quarter this year. As for fuel, the company enhanced its fleetwide fuel efficiency in 2013, reducing overall consumption by 5 percent.
Commenting on full year 2013, Donald stated, “Even in a challenging year, our company continued to produce strong cash from operations approaching $3 billion, funding our capital commitments and returning value to shareholders through regular dividend distributions of $775 million and share repurchases of $100 million.”  
Other initiatives included the launch of Princess Cruises’ 3,500-passenger Royal Princess and AIDA Cruises’ 2,200-passenger AIDAstella. In addition, the company announced an order for a Seabourn vessel expected in 2016 to replace three original Seabourn ships, which will exit the fleet during 2014 and 2015. Furthermore, the company announced the retirement of an 800-passenger Costa Cruises vessel.

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Donald also commented on the strategic initiatives by Carnival Cruise Lines to reach out to travel agents for support. He said the brand implemented a major travel agent outreach program, Carnival Conversations, a series of roadshows reaching thousands of agents across the country to better align with travel partners. In addition, the brand launched a new advertising campaign “Moments That Matter" and introduced a “Great Vacation Guarantee.”

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Internationally, the company doubled its presence in China, launched its first season of Japan cruises and opened 10 Asian sales offices.
Looking ahead to 2014, Carnival Corporation said cumulative advance bookings for the new year are running behind the prior year at prices in line with prior year levels. Since September, booking volumes for the first three quarters of 2014 are running well ahead of last year’s levels at lower prices.
Donald noted, “We are catching up on booking volumes and gaining momentum as we enter 2014. We believe the compelling value we have in the marketplace will continue to stimulate strong demand leading to a solid wave period. We continue to expect revenue yields to turn positive in the second half of 2014 compared to the prior year.”
Based on current booking trends, the company forecasts full year 2014 net revenue yields, on a constant dollar basis, to be down slightly compared to the prior year, while first quarter revenue yields are expected to decline 3 to 4 percent compared to the prior year and improve during the remainder of 2014 based on a recovery in ticket prices.
So what's ahead? “With over 100 ships and more than 10 million guests we have a scale advantage that cannot be replicated in this industry," he stated. "We are aggressively seeking opportunities to leverage that scale to drive top line improvement and gain cost efficiencies. To support that effort, we have realigned our leadership team and processes to achieve greater collaboration and cooperation.  We have heightened our focus on the guest experience and further exceeding guest expectations. As 2014 progresses, we will commence a number of strategic initiatives designed to fuel our earnings power, drive cash flow and improve return on invested capital over time.”

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