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Travel industry news

25 Jun 2019

BY Tom Parry

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Carnival Corporation takes financial stock of political impacts

Carnival Corporation has analysed the financial disruption of the Trump administration’s ban on US cruise calls to Cuba and the “heightened geopolitical and macroeconomic headwinds” affecting its brands in Germany and Italy.

Arnold Donald, Carnival Corporation

The cruise conglomerate also faces disruption due to Carnival Cruise Line ship Carnival Vista having to cancel three sailings in July for repairs due to a mechanical issues.

 

Shares fell by 8% late last week, while its annual earnings guidance was cut to $4.25-$4.35 adjusted profit per share, down from a previous estimate of $4.35-$4.55.

 

Second quarter profits fell to $451 million from $561 million compared with the previous year as revenue increased to $4.8 billion from $4.4 billion.

 

Carnival said the Cuba decision had had a financial impact of approximately $0.04 to $0.06 per share, while disruptions related to Carnival Vista were expected to bring a predicted impact of $0.08 to $0.10 per share.

 

On Cuba, Carnival said: “While the company was able to quickly adjust its itineraries to provide guests with attractive alternative vacation experiences, the suddenness of the regulatory change to this high-yielding destination has led to a near-term impact on revenue yields.”

 

Chief executive Arnold Donald said despite the geopolitical and macroeconomic issues in Europe to Costa Cruises and AIDA Cruises "we continue to expect higher yields in our North America and Australia brands, offset by lower yields in our Europe and Asia brands for the remainder of the year.”

 

Carnival described its cumulative advanced bookings for the remainder of 2019 as being “slightly ahead” of last year – with prices that remain in line.

 

“Pricing on bookings taken since March have been running behind the prior year on lower booking volumes in part because the company had less inventory remaining for sale. Cumulative advanced bookings for the full year 2020 are well ahead at prices that are in line compared to 2019,” it said.

 

Donald added: “Over the past five years we have demonstrated our ability to overcome multiple headwinds and deliver strong operational improvement.

 

“This year our growth has been hampered by a confluence of events, which we are focused on mitigating.

 

“Generating over $5 billion of cash flow and with a robust business model, our business is strong and we remain confident over time we will deliver double-digit earnings growth and growth in return on invested capital.”

 

The company said its third quarter constant currency net revenue yields are expected to be "flat to down slightly" in the wake of the voyage disruptions and regulatory change compared to the prior year.

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