Carnival Corporation is banking on strong forward bookings to offset rising fuel costs into 2019.
The world’s largest cruise operator spent $434 million on fuel in its third quarter to August 31, up from $307 million in the same summer period last year.
Shares in the parent company of P&O Cruises and Cunard fell by 4.8% to close at $63.74 in New York last night, having recovered from earlier heavy losses.
Profit for the three months to August rose to a record $1.7 billion from $1.3 billion a year earlier as revenue increased to $5.8 billion from $5.5 billion.
Changes in fuel prices and currency exchange rates decreased quarterly earnings by $0.08 per share.
Chief financial officer David Bernstein told analysts that the impact of higher fuel prices and the stronger dollar will “unfavourably impact 2019” by about $0.27 per share.
However, booking levels since June for the first half of 2019 have been running “significantly ahead” of last year.
“Pricing was up in all of the major programmes, but more than offset by lower prices in the Caribbean, which represents almost 40% of our capacity for the period as we are comparing to pre-2017 weather impact,” he said.
“If we isolate the first half of September which was impacted by the weather last year, booking volumes for the first half of 2019 have been running significantly ahead of last year’s pace well into the double-digit at prices that are higher than the prior year.
“At this point in time, cumulative advance bookings for the first half of 2019 are ahead of the prior year at prices that are in line.”
He added: “We are seeing good strong bookings on both side of the Atlantic in terms of sourcing.
“Iona, the P&O Cruises’ new ship; it just started booking and it’s been booking like crazy and it doesn’t get delivered until 2020.”
Carnival Corporation is forecasting a capacity increase of 4.7% for 2019.
President and CEO Arnold Donald told analysts: “We are closing in on fiscal 2018 and remained on track to deliver record full-year results and more importantly achieve double-digit return on invested capital based on the strategy we put in place five years ago.
“We are also very excited to usher in 2019 as we continue in our journey to sustain double-digit returns of invested capital with continued growth in both earnings and returns overtime.
“Next year, four new more efficient ships will enter service beginning with Holland America’s new Nieuw Statendam, Sky Princess, Costa Esmeralda, purpose-built for our European guests and Costa Benicia, Costa’s first ship to be purpose-built for China.
“As you can see our new capacity is vastly deployed across different brands as well as different source markets and destinations.”
At the same time a higher number of older ships are being sold than in past years.
“We recently announced four ships will leave the fleet next year. We will continue on our path of measured capacity growth, adding more efficient ships, replacing less efficient ships over time,” Donald added.
“Going forward, we remain on a path toward continued growth in earnings and returns driven to a greater degree by capacity increases as we add more efficient ships, replacing less efficient capacity.
“We believe the plans we have put in place will maximise returns to shareholders over time as we continue to execute in an industry that is both under-penetrated and capacity constrained.”
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