Carnival cuts outlook on deadly Italian cruise
Operator predicts recovery within two years
Carnival Corp., the world’s largest cruise operator, significantly cut its fiscal year profit and revenue forecast on Friday, citing a deadly disaster in January involving one of its ships.
Carnival shares fell 1.6 per cent to $30.46 at mid-afternoon.
The company said its North American brands have taken a smaller hit than European liners like Costa Concordia — which capsized off the coast of Italy in January, killing at least 25 people — and predicted a broader, companywide recovery in the next year to two.
“As time passes, we are confident that our business will improve,” Carnival operations chief Howard Frank told analysts in a conference call.
It added that booking volumes are improving, excluding Costa, which accounts for 14 of Carnival’s 99 ships. The company said business is getting better in France and Spain, though it still lags in Italy and Germany.
Despite the pullback by travellers after the accident, Carnival expects North American revenues to be up this year, raising investor hopes that its other brands such as Carnival, Holland America and Princess have been spared collateral damage from Costa’s problems.
However, the coast is not all clear. “There’s still a lot of uncertainty surrounding how long and the magnitude of the impact from this accident,” ITG senior leisure analyst Matthew Jacob said.
Carnival also made clear it will keep discounts to a minimum this year, after giving some bargains following the accident.
“Any consumers holding out for deeper
Any consumers holding out for deeper than normal discounts may be disappointed. Carnival CEO Micky Arison cautions travellers not to expect bargains in the aftermath of the Costa Concordia disaster
than normal discounts may be disappointed,” chief executive Micky Arison said.
Last week, Royal Caribbean said that as media coverage of the shipwreck last month in Italy has subsided, bookings are experiencing “a slow improvement.”
Still, the disaster is taking a large toll on Carnival’s short-term profits.
Carnival expects to earn $1.40 to $1.70 per share in the fiscal year. At its midpoint, this range is $1.15 per share lower than the forecast the company gave in December, largely because of a hit to the Costa brand’s earnings.
In late January, Carnival forecast that the Costa Concordia disaster would reduce profits by $155 million to $175 million this year.
On Friday, the company said the ship was deemed a “total loss.”
Following the disaster, Carnival and other companies, including the second-largest operator, Royal Caribbean Cruises Ltd., pulled back on marketing.
Carnival more recently suffered another blow after a fire on its Costa Allegra ship forced passengers to spend a few days without power in the Indian Ocean.
Carnival was already facing weaker demand in Europe, leading the company to cut prices for 2012 cruise bookings. At the time, it warned investors that improve- ments in its revenue per cabin would continue to be “slow” in 2012.
Carnival on Friday also lowered its revenue forecast and expects net revenue yield, a gauge of how much each cabin generates, to be down two to four per cent on a constant currency basis, compared with a previous forecast for a one- to two-per-cent increase.
Without Costa, the revenue yields should be flat this year, Carnival said.
The company reported a net loss of $139 million, or 18 cents a share, for the first quarter ended Feb. 29, compared to a profit of $152 million, or 19 cents a share, a year earlier.
Revenue rose 4.8 per cent to $3.58 billion in the first quarter.