Royal Caribbean Reports Second Quarter Profits of $24.7 Million Jul 25th 2013, 09:34
Royal Caribbean Cruises Ltd. reported second-quarter profits of $24.7 million, or 11 cents per share, a turnaround from a net loss of $3.7 million, or 2 cents per share, in the same period last year. Earnings include a hit of 5 cents per share related to the May 27 fire on Grandeur of the Seas and a non-cash charge of 7 cents per share accounting correction related to the company's affinity credit card program.
For the full year 2013, the company’s earnings outlook is essentially unchanged from the update provided in late May, which reflected the impact of the Grandeur of the Seas fire — the ship cancelled six seven-night cruises from Baltimore — and the strengthening of the U.S. dollar. Full-year earnings per share are expected to be in the range of $2.20 to $2.30.
The better-than-expected expenses and reduced cost guidance reflect actions the company is taking as part of “a broad profitability improvement program. These initiatives are aimed at increasing revenues and reducing expenses with a goal of improving the company’s returns on invested capital.”
“It is rewarding to see things coming together. While the operating environment has been frustrating, our bookings trajectory is looking good and I’m thrilled to see our cost initiatives beginning to pay off,” said RCCL Chairman and CEO Richard D. Fain. “Exploiting this positive momentum will help us take our returns and our profitability to the next level.”
The main shortfalls versus prior guidance are the affinity card adjustment, China sailings due to the conflict between China and Japan, and a modest reduction in expectations for the Caribbean. “Despite ongoing discounting in the region, the company’s Caribbean forecast was only modestly impacted and demand remains solid,” the earnings release said. “Europe continues to demonstrate year-over-year improvement, with net ticket yields expected to increase in the mid-single digits for the year. In aggregate, both pricing and booked load factors are higher for the second half of the year than at the same time last year.”
RCCL also said onboard revenues are going up due to improved U.S. consumer spending and new onboard revenue venues. Full-year earnings per share are expected to be in the range of $2.20 to $2.30.
The company also said its Spanish brand, Pullmantur, has increased its emphasis on Latin America, which now generates over 50 percent of its revenues. Pullmantur will soon open a head office in the region. Overall, the company has “grown its international footprint meaningfully over the past several years and has now achieved significant scale in both global deployment and sourcing.” The company is working to improve its global sales, marketing and general and administrative cost structure to further leverage economies of scale.
“The profitability improvement measures are designed to result in long-term cost savings and further revenue improvements that will benefit 2014 and beyond,” said Jason T. Liberty, senior vice president and chief financial officer. “We will likely incur some one-time charges in 2013 related to these actions, but we are confident that the increase in efficiency will be well worth it.”
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