Write downs a factor in lower Q3 earnings for Carnival Corp.

By Tom Stieghorst

Carnival Corp. earned $934 million in the key third quarter, down 28% from the $1.3 billion earned in the same quarter last year.

Revenue of $4.7 billion was in line with last year, Carnival said.

Carnival said it had impairment charges of $203 million to write down the value of two older Costa ships, its Ibero Cruises trademark and other items. Those were partly offset by a gain on fuel derivative contracts.

Like other cruise lines, Carnival earns the bulk of its annual profits in the third quarter, which at Carnival includes the months of June, July and August. 

For all of 2013, Carnival said it expects to earn $1.2 billion.

Carnival also reported income on a non-GAAP accounting basis, a method favoured by some investors. By that measure, it earned $1.1 billion, down from $1.2 billion a year ago. 

Carnival shares sink after profits warning

By Phil Davies

Carnival Corporation shares sunk by as much as 13% in the wake of an overnight profits warning on Monday.

The shares were down 8.6% at £22.02 in afternoon trading yesterday, the Financial Timesreported.

Numis analyst Wyn Ellis said the company’s problems had clearly affected consumer confidence and led to deep discounting.

“It is disappointing that management has left it this late in the season to issue its warning and, in our view, it has questions to answer,” he told the FT.

Karl Burns of Panmure Gordon said the decline in yields “bodes ill for the future as we think Carnival will struggle to regain pricing power”.

He added that “the market must begin to appreciate there are structural as well as cyclical challenges to the Carnival business model”.

James Hollins, Investec analyst, said: “The Carnival bull story has taken a major hit and we look for further detail at the time of Q2 results in late June.”

The negative responses followed the cruise giant saying net revenue yields will be down 2% to 3% this year as a result of cruise price cuts employed to boost booking levels.

Earnings will also be cut by 10 cents a share as a result of cruise cancellations following technical faults on a series of Carnival Cruise Lines ships.

Carnival Corp cuts profit forecast

By Phil Davies 

The world’s largest cruise conglomerate Carnival Corporation last night cut its profit forecast for the second half of the year.

The US-based cruise giant blamed lower net yields and the cancellation of cruises by its main Carnival Cruise Lines brand, which has suffered from a series of problems with its ships.

The line slashed prices in the UK by up to 40% last month following the announcement of a £500 million fleet-wide operational review in the wake of an engine fire which left Carnival Triumph (pictured) stranded in the Gulf of Mexico in February and technical faults on some of its other ships.

Carnival Cruise Lines then announced the withdrawal of its two ships from Europe in 2014, although denied this was due to the recent incidents.

Miami-based parent company Carnival Corporation said last night: “Current cruise ticket pricing for the company has driven higher booking volumes; however, at the same time, it has led to lower-than-anticipated net revenue yields which has resulted in reduced earnings guidance.”

It cut its full year earnings per share expectation to a range of $1.45 to $1.65 compared with previous guidance of $1.80 to $2.10.

The group said: “The company now expects full year 2013 net revenue yields to be down 2% to 3% compared to the previous flat yield guidance for the year.

“In addition, voyage cancellations beyond those incorporated in the company’s previous earnings guidance, as well as increased selling and administrative costs, are expected to reduce earnings by approximately $0.10 per share.”

These factors, as well as current fuel prices of $674 per metric ton and currency exchange rates of $1.30 to the euro and $1.53 to the pound, prompted the new earnings outlook.

The company, which has UK brands P&O Cruises and Cunard Line, is to announce second quarter results and more details of its 2013 full year guidance in late June.