Lower Fuel Spending Cushions Carnival Profits

Carnival sees the cruise market improving in 2013

Carnival Corp. and PLC reports it beat analyst expectation with a third quarter profit of $1.3 billion, down just half a percent year-over-year, as bunker prices decreased almost 4 percent for the period.

Fuel prices for the quarter were $659 per metric tonne (pmt), down from $686 pmt in the third quarter of last year, but the prices were higher than predicted in June guidance.

That cost the company an extra $18 million in realised losses from fuel hedging. Previous company data shows Brent, current trading around $111 per barrel, needs to trade above $127 per barrel if it is to benefit from any of its existing hedges.

Total fuel consumption for the quarter was 823,000 metric tonnes (mt), down 2.8% from 847,000 mt in 3Q 2011, while fuel consumption for the year to date declined just slightly, staying at about 2.5 million mt.

Revenues dropped to $4.7 billion in the third quarter of 2012 compared with $5.1 billion for the same quarter last year.

For the first nine months of the year, the company saw $1.2 billion in profits on revenues of $11.8 billion, down from $1.7 billion profits and $12.1 billion revenues last year.

Carnival said it has been working to mitigate declining ticket prices, particularly on its Italy-based Costa Cruises line, with cost containment measures and efforts do drive up onboard revenues.

Costa bookings suffered after the Costa Concordia sinking in January.

The company said its fleetwide booking volumes and pricing trends have been improving since June, with volumes rising 9 percent over the past six weeks compared with the same period last year, but cumulative advance bookings through the first half of 2013 are still behind the prior year and prices are somewhat lower.

"The pace of booking volumes remains healthy enabling us to continue to catch up on occupancy levels, while pricing has gradually improved," said Chairman and CEO Micky Arison.

"Both of these trends leave us well positioned for a recovery in cruise ticket prices beginning in the second quarter of 2013."

Looking into the coming year, Arison said the company will direct capacity growth toward emerging cruise markets, adding a new Costa ship in China and a Princess Cruises program aimed at the Japanese market.

Cruise industry leaders have said Asian nations are a growing market for industry as a whole.

Altogether, Carnival has seven new ships scheduled for delivery between 2013 and 2016.