Carnival Reports 2003 Earnings

Carnival Corporation has reported net income of $205 million, or $0.26 per share, on revenues of $1.8 billion for its fourth quarter ended Nov. 30, 2003, compared to income of $191 million, or $0.33 per share, on revenues of $1.0 billion for the same quarter last year.

Carnival also reported net income of $1.2 billion, or $1.66 per share, on revenues of $6.7 billion for its fiscal year, ended Nov. 30, 2003, compared to net income of $1.0 billion, or $1.73 per share, on revenues of $4.4 billion for the same period in 2002.

The results include Carnival for the entire period and P&O Princess Cruises, which Carnival acquired, from April 17, 2003.


“We are seeing a positive trend across all the brands and across geography,” said Carnival Chairman and CEO Micky Arison in a conference call with analysts on Thursday, Nov. 18 (2003).

“All the brands are booking well and 04 is shaping up extremely well,” added Howard Frank, vice chairman and COO.

The load factor for 2004 for advance bookings is slightly behind last year because of the closer-in booking curve, but that includes a 17 percent capacity increase year-over-year, and pricing is at about the same levels as last year, according to Arison, who also noted that bookings and pricing have been picking up over the past six weeks – running slightly ahead of last year’s levels.

The company’s earnings guidance is in the range of 17 to 20 cents per share, compared to 22 cents last year (or 16 cents on a proforma basis).

CFO and Executive Vice President Gerry Cahill said that the combined company achieved $25 million in synergies in 2003, which on the revenue side was mostly from onboard sources, including sharing best practices and renegotiated contracts. Other savings came from purchasing and consolidation of London offices. Cahill said the company is on track to save an additional $75 million in 2004 – “40 percent on the revenue line and 60 percent as reduced costs.”

“We are now eight months into the integration process. Our synergy targets will be achieved,” added Frank. He also said that the chemistry and working relationships between the different organizations (brands) were very strong.

Efforts underway also include using the Princess Cruises reservation system fleetwide.

Frank also mentioned Holland America Line’s new “Signature of Excellence” program, which he said, will realign the product to appeal to premium customers.

New Ships

Arison noted that Carnival will receive three new ships in 05 and three in 06, with annual capacity increases of 9.2 per cent in 05 and 4.6 percent in 06 – or slightly more in 06 if the company goes ahead and orders a new ship for Costa Crociere, which Arison said was being negotiated.

Meanwhile Arison said that the company has dropped the concept of a Princess/Carnival Cruises common (Ultimate Princess) platform.

“Princess is comfortable with the Caribbean Princess which is as big as they want to go,” he said.

“We have a design team working on a larger Carnival ship, but with the euro at its present level, I do not know if the project is viable in the foresee future,” Arison added. “I will be surprised if orders for our dollar-based brands are placed in the foreseeable future. But that does not preclude us from ordering for our European brands.

“As newbuilding capex goes down, some of those dollars will instead be shifted to (upgrading) 90s ships,” Arison said.

Future newbuildings will also be much more targeted, according to Arison, who said the company will look at what brands can support new capacity.

In 04, the European Carnival brands are growing their capacity by some 25 percent, while the North American brands are growing 15 percent {but from a much larger base).

Looking Forward

Beyond 04, as capacity slows down, there may be opportunity to increase margins, according to Frank, who added he was “hopeful the company can get the margins it used to get years ago.”

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