Royal Caribbean Reports Strong Third Quarter

Royal Caribbean Cruises Ltd. today reported third quarter results, updated its 2013 outlook and provided early commentary for 2014.


Third quarter results were better than expected, driven by stronger close-in demand and good cost control which more than offset the revenue and cost impacts from Celebrity Millennium’s unscheduled drydock.

Constant-Currency Net Yield for the third quarter increased 2.6%, which was 110 basis points better than the mid-point of previous guidance.  Stronger close-in demand in Europe and Asia, as well as robust onboard revenue drove the revenue improvement.

Adjusted earnings per share (“adjusted EPS”), which excludes a special charge of $12.2 million for restructuring and related expenses, was $1.71 per share for the third quarter.  U.S. GAAP EPS (after the charge) was $1.65.

Constant-Currency Net Yield outlook for the full year has been raised to an increase of approximately 3%.  NCC excluding fuel outlook is unchanged at an increase of 1% to 2%.

Full year adjusted EPS is now expected to be $2.30 to $2.35 (raising the mid-point by 7.5¢ per share).

The order book for 2014 remains ahead on both load factor and rate.  Most markets and products are showing year-over-year improvement, including Europe, Alaska and Asia, while advanced bookings for the Caribbean are somewhat weaker.   

014 should be the fifth consecutive year for yield growth and current earnings estimates are consistent with Street consensus of $3.06 per share.

“We are beginning to see the payoff from our efforts to improve returns during these challenging times,” said Richard D. Fain, chairman and chief executive officer.  “We have a ways to go, but our strategy and our investments are driving higher revenues and achieving cost efficiencies that bode well for 2014 and beyond.  We are especially grateful for our employees’ dedication to our profitability improvement initiatives,” Fain continued.


Royal Caribbean today announced third quarter 2013 adjusted net income of $377.9 million, or $1.71 per share, versus net income of $367.8 million or $1.68 per share, in the third quarter of 2012.  US GAAP net income, including the $12.2 million of restructuring and related charges was $365.7 million or $1.65 per share.

NCC excludes exceptional items such as the restructuring and related charges so that period-over-period comparisons are more meaningful.  Net yields are not affected by these charges.   

Net Yields on a Constant-Currency basis increased 2.6% during the third quarter.  Ticket revenue, particularly in Europe, exceeded expectations and on-board revenue yields increased 7.0% during the quarter.  The company also experienced better than expected close-in demand for its sailings in China.  The combination of these improvements more than offset the impact of the Millennium unscheduled drydock.

Constant-Currency NCC excluding fuel increased 3.9% – in line with expectations – despite such pressures as the Millennium drydock.  Bunker pricing net of hedging for the third quarter was $668 per metric ton and consumption was 323,000 metric tons.  Currency translation rates for the quarter were in line with prior expectations.  


Full Year 2013

The company’s yield outlook has improved for the full year 2013.  Constant-Currency Net Yield outlook for the full year has been raised to an increase of approximately 3%.  Constant-Currency expectations for NCC excluding fuel are unchanged at an increase of 1% to 2%.  Fuel costs are expected to be $3 million lower than previously calculated due primarily to energy conservation measures and the Millennium unscheduled drydock.

Based on the above and current fuel prices and currency exchange rates, the company expects that full year adjusted earnings per share will increase to a range of $2.30 to $2.35 per share.

Fourth Quarter 2013

Constant-Currency Net Yields are expected to be up 2% to 3% in the fourth quarter of 2013 and NCC excluding fuel are expected to increase 1% to 2% on a Constant-Currency basis.  Based on current fuel pricing and currency exchange rates, the company expects that fourth quarter adjusted earnings will be in the range of $0.15 to $0.20 per share.    

The company expects to incur additional restructuring and related expenses during the fourth quarter, on top of the $13.9 million it has recorded year-to-date.

Booking Environment

The company’s booked load factors are currently ahead of the same time last year in all four quarters of 2014.  Booked prices for the first quarter are in-line with the same time last year and are up for the second, third and fourth quarters.  Caribbean bookings have consistently been running ahead of the same time last year, although slightly below on a capacity adjusted basis.

“Caribbean pricing remains under some pressure, but while it is early in the booking cycle, we expect yields in the Caribbean to be flat to only slightly down in 2014,” said Jason T. Liberty, chief financial officer. “Fortunately, the summer Caribbean is a core strength of ours and with the improvements we are seeing in our other products, we are forecasting overall yield improvement in the low single digits for 2014,” said Liberty.

Booked load factors and rate are both up significantly year-over-year for Europe, which will account for 22% of the company’s capacity in 2014.  Despite the continued territorial dispute between China and Japan, Asian bookings are up considerably. Advanced bookings for Alaska and the company’s other product lines are also providing encouragement for yield improvement.


Fuel Expense

The company does not forecast fuel prices, and its fuel cost calculations are based on current at-the-pump prices, net of hedging impacts. Based on today’s fuel prices the company has included $230 million and $920 million of fuel expense in its fourth quarter 2013 and full year 2013 guidance, respectively.

Forecasted consumption is now 63% hedged via swaps for the remainder of 2013 and 56%, 45%, 25% and 5% hedged for 2014, 2015, 2016 and 2017, respectively.  For the same five-year period, the average cost per metric ton of the hedge portfolio is approximately $563, $618, $639, $612 and $640, respectively.

Full Earnings Release Is Here >>

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