Fuel Cost, Consumption Down For Carnival in Q1 2015

Carnival will consume 3.19 million mt of bunkers during FY 2015

Global cruise line operator Carnival Corp. (Carnival) Friday announced its fuel costs had fallen heavily year-on-year in the three months to February 28, 2015 (Q1 2015), while fuel consumption had also reduced.

Fuel prices declined 38 percent year-on-year to $406 per metric tonne (pmt) for Q1 2015 from $654 pmt in Q1 2014.

Carnival spent $318 million on bunkers in Q1 2015 versus $523 million in the same quarter of 2014.

Fuel consumption per available lower berth day (ALBD) fell 3.7 percent year-on-year, with Carnival consuming 783,000 metric tonnes (mt) of bunkers in Q1 2015 versus 800,000 mt in Q1 2014.

In addition, the outlook it presented for Q2 2015 and beyond forecast further bunker related savings.

“Changes in fuel prices net of fuel derivatives and currency exchange rates (constant currency) are expected to benefit second quarter earnings by $74 million compared to the prior year, or $0.09 per share,” said Carnival.

The group forecast bunker consumption of 810,000 mt in Q2 2015 and 3.19 million mt for the full year, expecting to pay $402 pmt for bunkers in Q2 and $406 pmt on average across the year.

However, Carnival’s heavily hedged positions mean the group’s ability to derive benefit from lower oil prices is limited.

In Q1 realised losses relating to fuel derivatives amounted to $57 million compared to a gain of $1 million in the same period of 2014, while unrealised losses relating to fuel derivatives amounted to $112 million versus losses of $17 million in the same period of 2014.

The unrealised losses result from being theoretically out of the money on fuel derivatives not qualifying for accounting purposes as hedges, and Carnival points that the position may change by the time the contracts mature, at a future date.

On Thursday, Carnival announced orders for nine newbuild ships, which will be the group’s “most efficient” vessels ever.