Fuel prices drag on Carnival's fourth quarter

AP News
Posted: Dec 20, 2011 11:04 AM
Fuel prices drag on Carnival's fourth quarter

Carnival's net income dropped 13 percent in the fourth quarter and the cruise ship operator, stung by rising fuel costs, cut its outlook for the first quarter of next year.

The company met profit expectations to end the year Tuesday, but adjusted net income expectations going forward left investors disappointed and shares slid 2 percent in early trading.

Chairman and CEO Micky Arison said that net yields, the amount a cruise company makes from its passengers after removing expenses, should continue on a slow recovery next year though economic conditions remain challenging.

In addition to the poor global economy, the cruise ship sector has wrestled each year with soaring fuel costs, with many altering routes or traveling slower between ports to offset those costs. Carnival Corp., Norwegian Cruise Line and others have said high fuel costs are a factor in new routes.

Carnival, which operates Holland America Line, Princess Cruises and Carnival Cruise Lines, reported earnings of $217 million, or 28 cents per share, in the quarter compared with $248 million, or 31 cents per share, a year earlier.

Fuel prices rose 39 percent to $680 per metric ton in the quarter. The company said it recently started a fuel derivatives program to help offset some of the risk tied to potentially sharp spikes in fuel prices.

A barrel of crude has crisscrossed the triple-digit price line a number of times recently.

Revenue for the three months ended Nov. 30 climbed 6 percent to $3.7 billion from $3.5 billion. That fell just short of the $3.78 billion that analysts surveyed by FactSet predicted.

Net revenue yields, which measure the amount a cruise company makes from its passengers after removing expenses, rose 1.5 percent. Carnival had predicted the figure would increase 1 percent to 2 percent.

Full-year earnings slipped 4 percent to $1.91 billion, or $2.42 per share, from $1.98 billion, or $2.47 per share, in the previous year.

Fuel prices climbed 32 percent for the year, which lowered full-year earnings by 68 cents per share.

Annual revenue increased 9 percent to $15.79 billion from $14.47 billion.

Looking ahead to 2012, Carnival says that cumulative advance bookings are at slightly higher prices but with slightly lower occupancies when compared with a year earlier.

The company anticipates 2012 adjusted earnings of $2.55 to $2.85 per share, compared to the forecast of $2.77 per share by analysts polled by FactSet.

The cruise company foresees net revenue yields climbing 1 percent to 2 percent, on a constant dollar basis.

For the first quarter, Carnival predicts adjusted earnings of 6 to 10 cents per share. Analysts expect earnings of 13 cents per share. Net revenue yields are predicted to climb 1.5 percent to 2.5 percent on a constant dollar basis compared with the year-ago period.

Fuel costs are anticipated to rise $93 million from the prior-year period, which the company said will cost it an additional 12 cents per share.

Shares fell 74 cents to $32.06.