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Carnival Corp Business Update and Q4 and Year-End Results

Carnival Corporation has provided its fourth quarter 2021 business update.

Key Highlights:

  • U.S. GAAP net loss of $2.6 billion and adjusted net loss of $2.0 billion for the fourth quarter of 2021.
  • Fourth quarter 2021 ended with $9.4 billion of liquidity.
  • For the cruise segments, revenue per passenger cruise day (“PCD”) for the fourth quarter of 2021 increased approximately 4% compared to a strong 2019. The increase was driven in part by exceptionally strong onboard and other revenue. the company said. 
  • As of November 30, 2021, 61% of the company’s capacity was operating with guests onboard and it expects the full fleet to be back in operation in the spring of 2022.
  • Cumulative advanced bookings for the second half of 2022 and first half of 2023 are at the higher end of historical ranges and at higher prices, with or without future cruise credits (“FCC”), normalized for bundled packages, as compared to 2019 sailings.
  • Customer deposits increased $360 million in the fourth quarter of 2021, marking the third consecutive quarter the company has seen an increase in customer deposits.
  • Through its debt management efforts, the company has refinanced over $9 billion to date, reducing its future annual interest expense by approximately $400 million per year and extending maturities, optimizing its debt maturity profile.
  • Carnival Corporation’s CDP score for climate change improved to a B from a C in recognition of enhanced disclosures, including the establishment of its 2030 sustainability goals and 2050 aspirations.

Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted: “Since resuming guest cruise operations, we have established effective protocols for COVID-19 and its variants and have returned 65,000 team members and 50 ships, all while delivering an exceptional guest experience to over 1.2 million guests and counting. And we have done that while honoring our commitment to strive for excellence in compliance, environmental protection and the health, safety and well-being of everyone.”

Donald added: “Our cash from operations turned positive in the month of November, and we expect consistently positive cash flow beginning in the second quarter of 2022 as additional ships resume guest cruise operations. We enter the year with $9.4 billion of liquidity, essentially the same liquidity level as last year but with significantly improved cash flow generation ahead, as ship operating cash flow and customer deposits continue to build. During 2021, we believe we have clearly maximized our return to service and strengthened our financial position to withstand potential volatility on our path to profitability.”

Fourth Quarter 2021 Results and Statistical Information

For the cruise segments, revenue per PCD for the fourth quarter of 2021 increased approximately 4% compared to a strong 2019. The increase was driven in part by exceptionally strong onboard and other revenue, the company said.

Occupancy in the fourth quarter of 2021 was 58 percent, which was better than the 54 percent in the third quarter of 2021.

Available lower berth days (“ALBD”) for the fourth quarter of 2021 were 10.2 million, which represents 47 percent of total fleet capacity. ALBDs are expected to be 14.1 million for the first quarter of 2022, which represents 63% of total fleet capacity.

Donald noted: “We achieved 4 percent higher revenue per passenger day in our fourth quarter compared to a strong fourth quarter of 2019, while at the same time ramping up occupancy and capacity. In fact, Carnival Cruise Line experienced another quarter of double-digit revenue growth per passenger day compared to 2019, operating at nearly 60 percent of its capacity while also improving occupancy, and is now approaching 90 percent occupancy levels in the month of December, which is a testament to the fundamental strength in demand for our cruise product.”

The company’s monthly average cash burn rate for the fourth quarter of 2021 was $510 million, which was better than expected, according to a press release.

The monthly average cash burn rate includes revenues earned on voyages, ongoing ship operating and administrative expenses, restart spend, working capital changes (excluding changes in customer deposits), interest expense and capital expenditures (net of export credit facilities), and excludes scheduled debt maturities as well as other cash collateral to be provided. As the company continues its gradual return to service, it expects to continue incurring incremental restart related spend, including the cost of returning ships to guest cruise operations and returning crew members to its ships as well as the incremental costs of maintaining enhanced health and safety protocols.

The gradual resumption of the company’s guest cruise operations continues to have a material impact on all aspects of its business, including the company’s liquidity, financial position and results of operations. The company expects a net loss for the first half of 2022 and a profit for the second half of 2022 on both a U.S. GAAP and adjusted basis for both periods.

Resumption of Guest Cruise Operations

Donald added: “With over 60 percent of our capacity now in operation and the remainder planned by spring, we are well positioned for our seasonally strong summer period.”

Since resuming its guest cruise operations in September 2020, the company has carried 1.2 million guests onboard its ships. As of November 30, 2021, eight of the company’s nine brands have resumed guest cruise operations as part of its gradual return to service, with 61 percent of its capacity operating with guests on board.

While the company will benefit from the disposal of 19 smaller, less efficient ships since the beginning of the pause in guest cruise operations, the company is forecasting net cruise costs without fuel per ALBD in 2022 to be significantly higher than 2019, according to a press release.

This is driven by a portion of the fleet being in pause status for part of the year, restart related expenses, the cost of maintaining enhanced health and safety protocols and inflation.

“We anticipate that most of these costs and expenses will end in 2022 and will not reoccur in fiscal 2023. In 2022, fuel consumption is forecasted to be 2.9 million metric tons. The blended spot price for fuel is currently $563 per metric ton,” Carnival stated in its earnings release.

Update on Bookings

Donald added: “Booking volumes continue to build for the remainder of 2022 and well into 2023 and we are achieving those early bookings with strong demand and pricing.”

Cumulative advanced bookings for the second half of 2022 and first half of 2023 are at the higher end of historical ranges and at higher prices, with or without FCCs, normalized for bundled packages, as compared to 2019 sailings. Booking volumes for the same periods during fourth quarter of 2021 were higher than the third quarter of 2021. Over the last few weeks, we have experienced an initial impact on bookings related to near-term sailings as a result of the Omicron variant. (Due to the gradual resumption in guest cruise operations, the company’s current booking trends will be compared to booking trends for 2019 sailings.)

Total customer deposits increased $360 million to $3.5 billion as of November 30, 2021 from $3.1 billion as of August 31, 2021. For the third consecutive quarter, the company saw an increase in customer deposits.

Refinancing

Carnival Corporation Chief Financial Officer David Bernstein said: “We ended the fiscal year with $9.4 billion of liquidity and have addressed our short-term maturities, improving our future liquidity position. Through our debt management efforts, we have refinanced over $9 billion to date, reducing our future annual interest expense by approximately $400 million per year and extending maturities, optimizing our debt maturity profile. During 2022, we will continue to be focused on pursuing refinancing opportunities to reduce interest rates and extend maturities. We believe we have the potential to generate higher EBITDA in 2023 compared to 2019 given our additional capacity and improved cost structure. Therefore, in 2023, our focus will shift to deleveraging driven by cash from operations.”

During the fourth quarter of 2021 the company refinanced $2.6 billion, bringing the total amount refinanced to over $9 billion to date. 

 

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