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March 24, 2009

Carnival first quarter income up

First quarter income for cruise giant Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) beat its own December guidance, but the company has nonetheless scaled back its earnings guidance for the full year.

Carnival reported net income of $260 million, or $0.33 diluted EPS, on revenues of $2.9 billion for its first quarter ended February 28, 2009. Net income for the first quarter of 2008 was $236 million, or $0.30 diluted EPS, on revenues of $3.2 billion.

Chairman and CEO Micky Arison indicated that operating results in the first quarter were better than the company's December guidance due primarily to lower than expected net cruise costs and stronger than expected net revenue yields on close-in bookings.

"Considering the economic climate," said Mr. Arison, "achieving higher quarterly net income is quite remarkable. The effect of lower revenue yields resulting from the pull back by the consumer was offset by the fall in fuel prices from prior year levels. Our continued focus on cost controls also played a meaningful role in our ability to achieve such positive results."

Key numbers for the first quarter of 2009 compared to the prior year were as follows:

On a constant dollar basis net revenue yields (revenue per available lower berth day) decreased 5.2 percent for Q1 2009. Net revenue yields in current dollars decreased 11.1 percent due to unfavorable currency exchange rates. Gross revenue yields decreased 11.2 percent.

Excluding fuel, net cruise cost per available lower berth day ("ALBD") for Q1 2009 was 1.4 percent higher on a constant dollar basis due to higher dry-dock costs.

Including fuel, net cruise costs per ALBD decreased 9.2 percent on a constant dollar basis (decreased 14.5 percent in current dollars). Gross cruise costs per ALBD decreased 13.8 percent.

Fuel price decreased 45 percent to $276 per metric ton for Q1 2009 from $499 per metric ton in Q1 2008 and was slightly below the December guidance of $295 per metric ton.

2009 Outlook

Since the start of the calendar year, booking volumes for the remaining three quarters are running 10 percent ahead of the prior year but at significantly lower prices. At this time, cumulative advance bookings for the remainder of the year are still behind last year's levels as the booking curve has moved closer to sailing date. Ticket prices for these bookings are also at substantially lower levels.

Arison noted "it has been a solid wave season thus far, despite the challenging economic environment, with several of our brands achieving record booking volumes. As we had anticipated, people continue to book cruise vacations while seeking the best possible value. Our brands have responded with a variety of pricing initiatives designed to provide our guests with the most value for their vacation dollars. Though pricing is down significantly we continue to fill our ships by reaching people who might not have otherwise considered a cruise vacation."

"As we look forward in 2009, we remain confident that the fundamental long-term drivers of our business remain intact. To enable us to overcome challenges in these difficult times, we have focused on maintaining tight cost controls and a strong liquidity position. The discipline instilled in our cost conscious culture is a particular advantage as our cost containment initiatives continue to mitigate the pressure on revenue yields," Arison added.

Carnival has sixteen ships under construction to be delivered through 2012 at a cost of $9 billion, the majority of which is expected to be funded by cash from operations. Cash from operations, committed financing facilities and available cash are forecasted to be sufficient to fund the company's cash requirements for 2009.

Although the company will not need to obtain new financing for 2009, it will continue to look for low cost opportunities to enhance its liquidity. At the end of the first quarter the company had $3.7 billion of liquidity, which includes $1.8 billion of available cash and undrawn credit lines, as well as $1.9 billion of committed ship financing facilities. In addition, Carnival continues to have the highest credit rating in the leisure industry.

The company expects full year net revenue yields, on a constant dollar basis, to decrease 10 to 12 percent compared to 6 to 10 percent in the company's December guidance as a result of the further deterioration in the U.S. and European economies. The company now forecasts a 16 to 18 percent decline in net revenue yields on a current dollar basis for the full year 2009 compared to 2008 caused by the weakening of foreign currencies against the U.S. dollar.

The company expects net cruise costs excluding fuel for the full year 2009 to be in line with the prior year on a constant dollar basis compared to an increase of 2 percent in its December guidance.

Since the December guidance, the movement in currency exchange rates has largely been offset by the continued decline in fuel prices. The company's revised 2009 guidance is based on current spot prices for fuel of $280 per metric ton and currency exchange rates of $1.36 to the euro and $1.44 to sterling.

Taking all the above factors into consideration, the company now forecasts full year 2009 earnings per share to be in the range of $2.10 to $2.30, compared to its previous guidance range of $2.25 to $2.75.

Second Quarter 2009

Second quarter constant dollar net revenue yields are expected to decline in the 8 to 10 percent range (down 15 to 17 percent on a current dollar basis). Net cruise costs excluding fuel for the second quarter are expected to be approximately 4 percent higher on a constant dollar basis due in part to the timing of certain expenses, including advertising, dry-dock and repairs and maintenance.

Based on current fuel prices and currency exchange rates, the company expects earnings for the second quarter of 2009 to be in the range of $0.30 to $0.32 per share, down from $0.49 per share in 2008.

During the second quarter three new ships will debut in Europe--AIDA Cruises' 2,050-passenger AIDAluna and Costa Cruises' 2,260-passenger Costa Luminosa and the 2,990-passenger Costa Pacifica.


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