Carnival: Strong Q3 Result Despite "Slight Drag" from Bunker Hedging, Expects FY2015 Bunker Savings of $741M

Carnival says its non-GAAP performance during 2015's Q3 "was the strongest of any quarter on record."

Carnival Corporation & plc [NYSE/LSE: CCL; NYSE: CUK] (Carnival) says its non-GAAP performance for the three months ended August 31, 2015 was "the strongest of any quarter on record" despite what CEO and President Arnold Donald described as "a slight drag from the net impact of fuel prices and currency."

The cruise giant posted an unrealised loss of $137 million for the period due its bunker hedging program, compared to a gain of $15 million for Q3 2014, after falling oil prices pushed August bunker prices in some key ports to their lowest in over a decade.

Nevertheless, Carnival reported a 4.3 percent increase in revenue yields year on year, noting that the result was also better than June guidance of an increase of 2 to 3 percent.


"In 2015, we are on track to achieve a nearly 35 percent earnings improvement and we are accelerating progress toward achieving double digit return on invested capital in the next three to four years," stated Donald.

"Our improved performance has driven even stronger operating cash, which is expected to exceed $4 billion this year."

Carnival said the price it paid for bunkers during the period was less than expected, having declined 33 percent to $439 per metric tonne (pmt), down from $650 pmt in 3Q 2014, $53 pmt less than its June guidance of $492 pmt.

That brought its overall bunker spend to $345 million compared to $518 million for the period last year, although consumption also dipped slightly to 786,000 metric tonnes (mt) from 797,000 mt for the period in 2014.

The company expects the price it pays for fuel to fall even further in the final quarter, and anticipates a consumption of 810,000 mt at $366 pmt.

Last December Carnival said that for full FY 2015 it expected to cut $475 million from its 2014 bunker bill of $2.033 billion, and based on its latest forecast the company is now predicting to boost those savings to $741 million, with a full FY fuel consumption forecast of 3,190 mt at an average price of $405 pmt.

As for its performance as a whole in 2016, Donald says a significant lengthening of the booking curve and reduced remaining inventory for H1 2016 compared to 2015 "bodes well for continued year-over-year revenue yield improvement."

In June Carnival said it was undeterred by the current lack of Liquified Natural Gas (LNG) bunkering infrastructure when it made a multi-billion dollar order for four newbuild LNG powered cruise ships, with the company's Roger Frizzell telling Ship & bunker that "early adopters can drive forward that infrastructure."