Carnival Corporation & plc reported net income of $248 million, with earnings per share increasing almost 30 percent to $0.31 diluted EPS, on revenues of $3.5 billion for its fourth quarter ended November 30, 2010. Net income for the fourth quarter of 2009 was $193 million, or $0.24 diluted EPS, on revenues of $3.3 billion.
Earnings per share in the fourth quarter was just $0.01 below the company’s September guidance despite the recently announced voyage disruptions, which reduced earnings by $0.07 per share.
The company reported net income for the full year ended November 30, 2010 of $2.0 billion, or $2.47 diluted EPS, compared to net income of $1.8 billion, or $2.24 diluted EPS, for the prior year. Revenues for the full year 2010 were $14.5 billion compared to $13.5 billion for the prior year.
Micky Arison, Carnival Corporation & plc Chairman and CEO, commenting on full year results said, “All-in-all, 2010 was an encouraging year with improved business trends from a gradually recovering economy. We achieved an 11 percent increase in net income on 7 percent higher revenues. We recovered almost 3 points of revenue yield (constant dollars) from 2009’s levels, while improved processes and efficiencies led to a 3 percent reduction in unit costs excluding fuel.”
Arison added, “Cash from operations increased 14 percent to reach $3.8 billion, more than enough to fund our expansion program which peaked this year at a capital investment of $3.6 billion. We also reinstated the dividend early in 2010 at an initial rate of $0.10 per quarter.”
Key metrics for the fourth quarter of 2010 compared to the prior year were as follows:
• On a constant dollar basis net revenue yields (net revenue per available lower berth day) increased 3.9 percent for 4Q 2010, which was better than our September guidance of up 2.5 to 3.5 percent. Gross revenue yields in current dollars increased 1.5 percent.
• Excluding fuel and voyage disruptions, net cruise costs per available lower berth day (“ALBD”) for 4Q 2010 were down 1.1 percent on a constant dollar basis. Gross cruise costs per ALBD in current dollars increased 0.8 percent.
• Fuel prices increased over 6 percent to $488 per metric ton for 4Q 2010 from $458 per metric ton in 4Q 2009 and was slightly higher than the September guidance of $479 per metric ton.
During the fourth quarter, Cunard Line’s 2,068-passenger Queen Elizabeth was delivered and was christened by Her Majesty Queen Elizabeth II in a much anticipated ceremony in Southampton, England. This was the sixth successful ship delivery in 2010 furthering the company’s strategy to expand its global presence. Today, P&O Cruises (Australia) held the inaugural celebration of Pacific Pearl, expanding its fleet to four ships. In addition, the company took advantage of attractive shipyard prices to order three more vessels during the year, bringing the company’s order book to 10 ships to be delivered through 2014.
2011 Outlook
Since last September, booking volumes continued to be strong and prices for those bookings are higher than last year. At this point in time, cumulative advance bookings for 2011 are at higher prices with slightly lower occupancies versus last year. Based on these booking trends, the company forecasts a 3 to 4 percent increase in constant dollar net revenue yields for the full year 2011.
Looking forward Arison noted, “Booking trends have continued to improve for both our North American and European brands, particularly for our peak summer season. We are optimistic these positive trends are an indicator of a strong wave season, our heaviest booking period which begins in early January. Given the recent cold weather and snow, particularly in the Northern U.S. and Europe, there is no better time to book a cruise vacation.”
The company expects net cruise costs per ALBD excluding fuel for the full year 2011 to be flat compared to the prior year on a constant dollar basis. Based on current spot prices for fuel, forecasted fuel costs for the full year are expected to increase $134 million compared to 2010, costing $0.17 per share. This is forecasted to be partially offset by favorable movements in currency exchange rates worth $0.04 per share.
Taking all the above factors into consideration, the company forecasts full year 2011 earnings per share to be in the range of $2.90 to $3.10 fully diluted, compared to $2.47 for 2010.
Arison added, “Based on the above guidance, we estimate our cash from operations will exceed $4 billion in 2011, while our capital investment commitments decrease to $2.6 billion. We expect to generate significant free cash flow in 2011 and beyond, which should provide us ample opportunities to return additional cash to shareholders over time.”
First Quarter 2011
First quarter constant dollar net revenue yields are expected to increase by approximately 2 percent compared to the prior year. The company expects improved net revenue yields as the year progresses. Net cruise costs per ALBD excluding fuel for the first quarter are expected to be up 3 to 4 percent compared to the prior year on a constant dollar basis due primarily to the $44 million gain from the sale of P&O Cruises’ (UK) Artemis in the first quarter of 2010. Excluding the Artemis gain and fuel, net cruise costs per ALBD for the first quarter are expected to be flat to up 1 percent on a constant dollar basis. Forecasted fuel costs for the first quarter are expected to increase $25 million compared to the prior year, costing $0.03 per share.
Based on current fuel prices and currency exchange rates, the company expects fully diluted earnings for the first quarter 2011 to be in the range of $0.15 to $0.19 per share, down from $0.22 per share in 2010. The first quarter of 2010 included the favorable impact of $0.10 per share of unusual items.
