Carnival Corporation & plc (NYSE/LSE: CCL; NYSE:CUK) today announced that it has declared a December dividend of $0.40 per share and that its Board of Directors has voted to suspend its quarterly dividend for the next quarter as a result of the highly volatile state of the financial markets. The company intends to maintain the dividend suspension throughout 2009 but will reevaluate its dividend policy based on the circumstances prevailing during the year.
“The company’s cash flow remains strong. However, in light of the unusually high cost of raising new capital, continuing concerns about financial institution liquidity and current uncertainties in the global economy, we believe that preserving cash is a prudent step which will further strengthen the company’s balance sheet and enhance our financial flexibility” said Micky Arison, Carnival Corporation & plc chairman and CEO. The dividend suspension would result in annualized cash savings of approximately $1.3 billion. The significant liquidity provided by the dividend suspension gives the company the flexibility to fund its 2009 capacity growth without the need to access credit markets.
Business Outlook
The company has increased its previous full year 2008 earnings per share guidance from $2.79 to $2.81, to $2.81 to $2.83 primarily based on revised currency exchange rates and fuel prices.
However, the company has experienced a further slowdown in booking volumes during the recent turmoil in the financial markets. Looking at the first half of 2009, occupancy levels for advance bookings lag the prior year, with ticket prices for these bookings on a constant dollar basis at slightly higher levels compared to the prior year.
With regard to its 2009 outlook, the company is providing 2009 earnings per share guidance in the broader range of $2.50 to $3.00 given the uncertain economic outlook. Factoring in the slowdown in bookings, the company is forecasting full year constant dollar net revenue yields (revenue per available lower berth day) to be lower by 1% to 5% compared to the prior year. The recent significant movement in the euro and sterling currencies results in lower current dollar net revenue yields by 7% to 11%. However, the recent decline in fuel prices will result in a significant benefit to the 2009 full year financial results. The company’s 2009 guidance is based on fuel prices of $380 per metric ton and currency exchange rates of $1.30 to the euro and $1.64 to sterling. Further guidance on the 2009 fiscal year will be provided with the fourth quarter earnings release to be issued in December 2008.
Stock Repurchase and Issuance
In addition, the company filed a supplemental prospectus today to issue up to 19.2 million Carnival Corporation shares in the U.S. market. The shares will be issued from time to time in “At The Market” (ATM) transactions with the proceeds being used to repurchase shares of Carnival plc in the UK market (Stock Swap). Since Carnival plc shares are currently trading at a discount to Carnival Corporation shares, the company would derive an economic benefit from the stock swap.
The company will only issue Carnival Corporation shares in the U.S. market to the extent it can complete the stock swap with a resulting economic benefit. Arison added that “the dual listed company structure reflects the company’s global brand portfolio and it remains committed to the Carnival plc listing on the London Stock Exchange as the company benefits from a more diversified shareholder base and greater access to global capital markets.”
December Dividend
The board has approved a record date for the December dividend of November 21, 2008, and a payment date of December 12, 2008. Holders of Carnival Corporation common stock and Carnival plc ADSs will receive the dividend payable in U.S. dollars. The dividend for Carnival plc ordinary shares will be payable in U.S. dollars or sterling. In the absence of instructions or elections to the contrary, holders of Carnival plc ordinary shares will automatically receive the dividend in sterling.
Dividends payable in sterling will be converted from U.S. dollars at the exchange rate quoted by the Bank of England in London at 12 noon on December 1, 2008. Holders of Carnival plc ordinary shares wishing to receive their dividend in U.S. dollars or participate in the Carnival plc Dividend Reinvestment Plan must elect to do so by November 21, 2008.
Conference Call
The company has scheduled a conference call with analysts at 10:30 a.m. EDT (2:30 p.m. GMT) today to discuss the dividend suspension, the business outlook and the stock swap. This call can be listened to live, and additional information can be obtained, via Carnival Corporation & plc’s Web site at www.carnivalcorp.com and www.carnivalplc.com.
Carnival Corporation & plc is the largest cruise vacation group in the world, with a portfolio of cruise brands in North America, Europe and Australia, comprised of Carnival Cruise Lines, Holland America Line, Princess Cruises, The Yachts of Seabourn, AIDA Cruises, Costa Cruises, Cunard Line, Ibero Cruises, Ocean Village, P&O Cruises and P&O Cruises Australia.
Together, these brands operate 89 ships totaling more than 170,000 lower berths with 17 new ships scheduled to be delivered between March 2009 and June 2012. Carnival Corporation & plc also operates Holland America Tours and Princess Tours, the leading tour companies in Alaska and the Canadian Yukon. Traded on both the New York and London Stock Exchanges, Carnival Corporation & plc is the only group in the world to be included in both the S&P 500 and the FTSE 100 indices.
