Cruise line operator Royal Caribbean Cruises Ltd. (RCL), on Tuesday reported a decline in profit for the third quarter, hurt by a drop in revenues from last year, mainly due to pricing pressure on its softer fall season sailings. Earnings came in well ahead of Street estimates, while revenues fell short of expectations. Citing a weak economy in Florida, the company said it expects to report a loss for the fourth quarter. Royal Caribbean also indicated earnings outlook for full year 2009 to come in at the lower end of its previous forecast.
The Miami, Florida-based company's net income for the third quarter declined to $230.40 million or $1.07 per share from $411.89 million or $1.92 per share in the year-ago quarter.
On average, 17 analysts polled by Thomson Reuters expected the company to earn $1.00 per share for the quarter. Analysts' estimates typically exclude one-time charges and gains.
In the sequentially preceding quarter, Royal Caribbean posted a net loss of $35.09 million or $0.16 per share, compared to net income of $84.75 million or $0.40 per share in the prior-year quarter.
Revenues for the recent third quarter dropped to $1.76 billion from $2.06 billion in the same quarter last year, shy of analysts' consensus revenue estimate of $1.77 billion for the quarter.
For the preceding second quarter, Royal Caribbean's revenues decreased to $1.35 billion from $1.58 billion in the same quarter last year.
Passenger ticket revenues for the third quarter decreased to $1.27 billion from $1.50 billion in the prior-year quarter, and onboard and other revenues were $492.93 million, lower than $565.17 million in the year-ago quarter
Operating income for the quarter dropped to $306.84 million from $461.91 million in the prior-year quarter. Total cruise operating expenses were $1.11 billion, down from $1.27 billion in the year-ago quarter, including fuel expenses of $146.25 million, sharply lower than $207.27 million a year ago.
Richard Fain, chairman and chief executive officer, Royal Caribbean said, "Like many other travel companies, we saw more strength than we expected during our peak season but have been experiencing more pricing pressure on some of our traditionally softer fall season sailings."
Occupancy for the quarter contracted to 105.4% from 107.8%, while passenger cruise days increased to 7.54 million from 7.48 million in the year ago quarter. Available passenger cruise days or APCD, rose to 7.15 million from 6.94 million in the prior-year quarter.
Net yields declined 16.5% for the quarter to $182.60 per APCD from last year, while it declined 14.5% on a constant dollar basis. The H1N1 virus had a negative impact on yields of about two percentage point.
Net cruise costs per APCD decreased 10.0% to $856.13 million, while it declined 8.8% after adjusting for changes in currency. Net cruise costs per APCD, excluding fuel, decreased 3.8%, and declined 2.2% on a constant dollar basis. Fuel consumption was 318.2 thousand metric tons at an average cost of $460 per metric ton.
As at September 30, 2009, liquidity was $1.1 billion, including cash and the undrawn portion of the company's unsecured revolving credit facility.
The company reported that booking volume since mid-September was up about 40% compared to same period last year, with favorable comparison for cruises departing both in the fourth quarter and next year. Overall though, the business environment is largely unchanged and stable, the company expects the yield deficit to continue to improve in the fourth quarter and remain optimistic that 2010 will bring year-over-year yield improvement.
On October 28, the company took delivery of the Royal Caribbean International's Oasis of the Seas , which was funded with a 12-year amortizing unsecured facility that matures in 2021.
For the nine-month period, the company's net income dropped sharply to $159.07 million or $0.74 per share from $572.24 million or $2.67 per share last year.
Total revenues for the year-to-date period dropped to $4.43 billion from $5.07 billion in the same period last year.
Looking ahead to the fourth quarter, Royal Caribbean Cruises anticipates fourth quarter loss per share of about $0.05.
Analysts currently expect the company to report earnings of $0.04 per share for the fourth quarter.
The company noted that during the fourth quarter, it historically sources a disproportionate number of its guests from Florida, but as a result of the weaker economy in the state, it does not anticipate the same strength of close-in bookings in the fourth quarter as was in the third quarter.
Further, the company projects net yields to decline about 7% to 8% in the fourth quarter, slightly lower than its previous forecast of down mid-single digits.
For fiscal 2009, the company now expects earnings of $0.70 per share, compared to earlier issued forecast of $0.70 - $0.80 per share. The Street is currently looking for earnings of $0.74 per share for fiscal 2009.
Net yields for the full year are projected to decline about 14%, while on a constant dollar basis, net yields are projected to decline 12% to 13%.
Based on current ship orders, the company's projected capital expenditures for 2009, 2010, 2011 and 2012, estimates are unchanged at $2.1 billion, $2.2 billion, $1.0 billion, and $1.0 billion, respectively.
Among Royal Caribbean's peers, Miami, Florida-based cruise vacation group Carnival Corp. (CCL,CUK ,CCL.L), on September 22, reported a decline in profit for the third quarter, hurt mainly by a significant drop in revenues amid the global economic downturn. Net income was $1.07 billion or $1.33 per share, lower than $1.33 billion or $1.65 per share in the year-ago quarter. Quarterly revenues declined to $4.14 billion from $4.81 billion last year.
RCL is currently trading at $20.05, down $0.62 or 3.00%, on the NYSE. In the past 52 weeks, the stock trended in a broad range of $5.40 - $25.02, with a three-month average volume of 3.86 million shares.
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