Carnival Corporation has provided an update on its business over the fourth quarter. Although the numbers seem to be heading in the right direction, the company is far from profitable.
The cruise company posted a net loss of 1.6 billion, or -$1.27 per share over the quarter, and the adjusted EBITDA for the fourth quarter of 2022 was -$96 million. On a positive note, passenger spending onboard the company’s cruise ships increased, and bookings are significantly higher for 2023 compared to 2019.
Stock Market Reacts Positively to Carnival Corporations Fourth Quarter
As expected, Carnival Corporation announced another loss in its Q4 earnings update today, December 21. The cruise company already announced it would likely be posting negative numbers in Q4 during its 3rd quarter earnings call.
With a U.S. GAAP net loss of $1.6 billion and an adjusted net loss of $1.1 billion for the fourth quarter of 2022, the largest cruise company in the world still has a mountain of work to do before it becomes profitable again.
That being said, it’s not all bad news for Carnival. Passenger spending has seen some significant increases, occupancy levels have been significantly higher than in the 3rd quarter, and bookings are at higher levels than in 2019, all spurred on by the successful launch of several Excel-class ships.
The stock markets reacted slightly positively after the earnings were released, trading some 6% higher after the markets opened. This is a far cry from the usual slump in stock prices that we’ve seen from CCL stocks in recent years following earnings releases.
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.”
The positive sentiment is further boosted by several measures that Carnival Corporation has taken to minimize the debt repayment interest on more than 28 billion of debt the company incurred during the pandemic.
Bookings & Occupancy Looking Strong
Whereas the financial side of Carnival Corporation is still a far cry from where it was pre-pandemic, the cruise company is making serious headway to come back on top.
Occupancy levels in the fourth quarter of 2022 were 19 percentage points below 2019 levels. This was better than the third quarter, which was 29 percentage points below 2019 levels.
This growth is reflected in the cruise company’s bookings over its nine brands, which sits higher than its historical average at higher prices compared to a strong 2019, with November booking volumes exceeding those seen in 2019.
“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,” Weinstein continued.
“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.”
One sign where customer confidence in Carnival Corporation’s cruise brands shines through is the customer deposits. This 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.
Weinstein:
“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.”
What Does The Future Hold for Carnival Corporation?
One area that continues to hurt Carnival Corporation is the older ships in its fleet. The company announced today that it would be offloading three more ships on top of several disposed of in the last two years. These smaller-less ships include two from Costa Cruises’ fleet and one from a different, undisclosed brand.
This is partly due to the continued cruise ban in China, where Costa Cruises had a large presence before 2020. 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, mostly in Europe.
To reduce fuel costs, Carnival Corporation is implementing Expanding Air Lubrication Systems (ALS) on several of its ships to reduce fuel costs. Given the $40 million unfavorable impact from fuel prices on Adjusted EBITDA, it is a technology that will be needed sooner rather than later.
Currently, five ALS are operating in the company’s fleet, and six more ships are in the process of installing the systems, with at least eight more installations planned in the future.
ALS creates air bubbles that cushion the flat bottom of a ship’s hull, reducing frictional resistance and the propulsive power needed to move the ship through water. It is estimated that this will result in approximately a 5% reduction in fuel consumption and carbon emissions on ALS-equipped ships.
Carnival Chief Maritime Officer William Burke noted: “The installation of air lubrication technology is another example of our ongoing efforts to drive energy efficiency and reduce fuel consumption and emissions throughout our fleet.”
Josh Weinstein believes that the current initiatives and the processes that have been implemented lately are a sign that Carnival Corporation can leave the pandemic behind and focus solely on bringing the company back to profitability:
“We’ve completed a monumental 18-month journey – returning 90 ships to service, re-boarding over 100,000 team members, and restarting our unmatched portfolio of eight private island and port destinations plus our unrivaled land-based footprint in Alaska and the Yukon, all while welcoming back nearly 9 million guests.”
2023 then seems like the year that Carnival Corporation is betting on to return to ‘normal.’ Whether that will be successful remains to be seen, as positive signs from Carnival Corporation have been short-lived over the last two years.
What is certain is that the most important factor, guest confidence, seems to have returned, something that not many would have expected one year ago.
