Thomas Foods
Assa Abloy

Carnival Corporation: 2022 Business Update, Q4 and Year-End Earnings

Carnival ships docked

Carnival Corporation has issued its fourth quarter 2022 business update.

  • U.S. GAAP net loss of $1.6 billion, or $(1.27) diluted EPS and adjusted net loss of $1.1 billion, or $(0.85) adjusted EPS, for the fourth quarter of 2022.
  • Adjusted EBITDA for the fourth quarter of 2022 was $(96) million, within the previous guidance range of breakeven to slightly negative, despite an approximate $40 million unfavorable impact from fuel price and currency rates.
  • Adjusted EBITDA for the second half of 2022 was $207 million, inclusive of an increased investment in advertising to drive revenue in 2023.
  • For the cruise segment, revenue per passenger cruise day (“PCD”) for the fourth quarter of 2022 increased 0.5% (3.8% in constant dollar) compared to a strong 2019, overcoming the dilutive impact of future cruise credits (“FCCs”), and better than the third quarter of 2022 which decreased 4.1% (2.1% in constant dollar) compared to 2019.
  • Occupancy in the fourth quarter of 2022 was 19 percentage points below 2019 levels, on capacity in guest cruise operations approaching 2019 levels. This was better than the third quarter which was 29 percentage points below 2019 levels on 8% lower capacity than 2019.
  • The company’s full year 2023 cumulative advanced booked position is higher than its historical average at higher prices in constant currency, normalized for FCCs, as compared to a strong 2019.
  • Total customer deposits hit a fourth quarter record of $5.1 billion as of November 30, 2022, surpassing the previous record of $4.9 billion as of November 30, 2019.
    Fourth quarter 2022 ended with $8.6 billion of liquidity.

 

Carnival Corporation & plc’s Chief Executive Officer Josh Weinstein commented: “Throughout 2022, we have successfully returned our fleet to service, aggressively building occupancy on growing capacity, while driving revenue per passenger cruise day higher than 2019 record levels, both in the fourth quarter and full year overall. We have also actively managed down our costs while investing to build future demand.”

Weinstein continued: “Booking volumes strengthened following the relaxation in protocols, cancellation trends are improving globally, and we have seen a measurable lengthening in the booking curve, across all brands. The momentum has continued into December, which bodes well for 2023 overall as more markets open for cruise travel, protocols continue to relax, our closer to home itineraries play out, our stepped-up advertising efforts pay dividends and our brands continue to hone all aspects of their revenue generating activities.”

Weinstein added: “We believe we are accelerating our return to strong profitability through our fleet and brand portfolio management which is delivering prudent capacity growth weighted toward our highest returning brands and amplified by nearly a quarter of our fleet consisting of newly delivered vessels. We believe this leaves us well positioned to drive revenue growth across our global brand portfolio as we continue to leverage our scale on our industry leading cost base, to deliver free cash flow which over time will propel us on the path to deleveraging, investment grade credit ratings and higher ROIC.”

Fourth Quarter 2022 Results and Statistical Information

  • For the cruise segment, revenue per PCD for the fourth quarter of 2022 increased 0.5% (3.8% in constant dollar) compared to a strong 2019, overcoming the dilutive impact of FCCs, and better than the third quarter of 2022 which decreased 4.1% (2.1% in constant dollar) compared to 2019.
  • Occupancy in the fourth quarter of 2022 was 19 percentage points below 2019 levels, on capacity in guest cruise operations approaching 2019 levels. This was better than the third quarter which was 29 percentage points below 2019 levels on 8% lower capacity than 2019.
  • Revenue in the fourth quarter of 2022 was $3.8 billion, which was 80% of 2019 levels. This was better than the third quarter which was 66% of 2019 levels, an improvement of 14 percentage points.
  • Adjusted cruise costs excluding fuel per ALBD (see “Non-GAAP Financial Measures” below) continued its sequential quarterly improvement in the fourth quarter of 2022 with a 7.2% increase (11% in constant currency) as compared to the fourth quarter of 2019, down from a 25% increase (same in constant currency) in the first quarter of 2022 as compared to the first quarter of 2019. Costs remain higher as a result of higher advertising investments to drive 2023 revenue as well as partially mitigating the impacts of a high inflation environment. This was in line with the previous guidance of a low double-digit increase in constant currency.
  • Changes in fuel price, fuel mix and currency rates unfavorably impacted the fourth quarter of 2022 by $267 million compared to the fourth quarter of 2019.
  • Adjusted EBITDA (see “Non-GAAP Financial Measures” below) for the fourth quarter of 2022 was $(96) million, within the previous guidance range of breakeven to slightly negative, despite an approximate $40 million unfavorable impact from fuel price and currency rates since forecasted information was provided in the Third Quarter Business Update.
  • Adjusted EBITDA for the second half of 2022 was $207 million, inclusive of an increased investment in advertising to drive revenue in 2023.
  • Total customer deposits hit a fourth quarter record of $5.1 billion as of November 30, 2022, surpassing the previous record of $4.9 billion as of November 30, 2019.

 

Fleet Optimization

The company expects to remove three additional smaller-less efficient ships from its fleet. Two of these three ships are from Costa Cruises’ fleet as part of the company’s strategy to right-size the brand in light of the continued closure of cruise operations in China, and Costa’s significant presence there prior to the pause in the company’s guest cruise operations.

Once completed in spring 2024, the company’s fleet optimization strategy will have reduced Costa’s capacity so that it approximates the 2019 capacity Costa dedicated outside of Asia to its core markets in Continental Europe, according to a press release.

The company now expects total capacity growth of 3% for 2023 compared to 2019, at the lower end of the previous guidance range of 3% to 5%. The prudent capacity growth rate includes the benefit that newly delivered ships will represent nearly a quarter of the company’s capacity.

Bookings

According to Carnival, booking volumes during the fourth quarter of 2022 for 2023 sailings are nearing 2019 comparable booking levels, with November booking volumes exceeding 2019 levels.

The company’s North America and Australia (“NAA”) segment’s fourth quarter 2022 booking volumes for 2023 exceeded the comparable period in 2019.

The company’s Europe and Asia (“EA”) segment’s fourth quarter 2022 bookings for 2023 were lower than the comparable period in 2019. However, reflecting the closer-in booking pattern of its Continental European brands, its fourth quarter 2022 bookings for fourth quarter sailings significantly exceeded the comparable period in 2019, according to a press release.

Further, the company continues to see an extension of its EA segment’s booking curve, facilitating more optimal revenue yields over time.

Marking an early start to wave season (peak booking period), the company ended the year with multiple brands breaking records on very strong Black Friday and Cyber Monday booking volumes. The company’s full year 2023 cumulative advanced booked position is at higher prices in constant currency, normalized for FCCs, as compared to strong 2019 pricing with a booked position that is higher than the historical average. During the second half of 2022, the company significantly increased its advertising activities to support booking volumes.

The company’s current booking trends are compared to booking trends for 2019 as it is the most recent full year of guest cruise operations.

 

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