Carnival Bunker Spend Falls 8%, Operating Profit up 25%

Carnival has saved 1 billion gallons of bunkers since 2007

Global cruise company Carnival Corp. (Carnival) [NYSE:CCL] last week announced year-on-year growth in terms of 2014 passenger numbers, revenue, and operating profit, and said it had reached 1 billion gallons in bunker savings since 2007.

During the year, the company spent $2.03 billion on bunkers, down 8 percent from $2.21 billion in 2013.

In addition, the group booked unrealised losses of $268 million, and realised losses of $3 million, as a result of its fuel hedging programme.

But the group, which claims 48 percent of the global cruise market measured in passenger numbers, said it had saved $2.5 billion in fuel costs and 1 billion gallons of bunkers since 2007, equating to a 25 percent drop in fuel consumption over the period.

Group President and CEO, Arnold Donald, said "as we continue to advance our fleet, we have a number of ships that we expect to replace with newer, larger and more fuel efficient vessels over time."

"These new ships will be more than double the size of those they are replacing, offer higher yielding balcony cabins, more than 20 percent lower unit costs and greater than 35 percent improved fuel efficiency."

Discussing the performance of its fuel hedging portfolio, the group said "we designed our fuel derivatives program to maximize operational flexibility by utilizing derivative markets with significant trading liquidity and our program currently consists of zero cost collars on Brent."

Operating Profit up 25 Percent

Approximately 51 percent of 2015's projected fuel consumption is covered by hedged contracts with floor prices for Brent between $74 and $80.

Previous group CEO Micky Arison, who was in charge when many of Carnival's existing contracts were agreed, described the group's hedging strategy as "insurance", the cost of which can become higher than desirable if the market moves against expectations.

On Wednesday Brent crude finished trading at $57.54 per barrel.

Overall, the group posted strong results for 2014, with operating profit up 25 percent at $1.79 billion and net profit up 15 percent at $1.24 billion.

Passenger numbers were up 5 percent at $10.6 million while revenue rose to $15.88 billion from $15.46 billion in 2013.

Donald reiterated that the group was responding to 2015 Emissions Control Area (ECA) sulfur limits by "aggressively installing new air emissions technology on approximately 70 percent of our fleet by 2017."