This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Carnival Corp. (CCL: chart) on December 20, 2007.
Key Investors Issues
- The earnings per share dropped to 44 cents from 51 cents in previous year.
- Quarterly revenue of $3.1 billion represents a growth of 11% over the prior year.
- For fiscal 2007, Carnival had record net income of $2.4 billion, on revenue of $13 billion.
- The earnings per share guidance for fiscal 2008 is in the range of $3.10 to $3.30.
Fourth Quarter Fiscal 2007 Financial Highlights
Carnival reported net income of $358 million or 44 cents per share compared to net income of $416 million, 51 cents diluted EPS, for the fourth quarter 2006.
The EPS for the fourth quarter came in at the high end of the previous guidance and this resulted from stronger pricing on bookings taken close to the departure, which was partially offset by higher than expected fuel expense.
Revenues for the fourth quarter 2007 increased to $3.1 billion from $2.8 billion for the fourth quarter 2006.
The capacity increased 7.5% with the majority of the increase going to the European brand. Net revenue yields in current dollars increased 4.9% for the quarter. In constant dollars, which eliminates the effects of currency rate changes, net revenue yield increased 1.1%. This was higher than the previous guidance, as the firm saw a stronger pricing on close-in booking.
Overall in the fourth quarter, the firm saw yield improvements in its North American brands, driven by the continued recovery in the Caribbean, which was somewhat offset by lower yields in constant dollars in European brands. However, European brands are still achieving solid results, despite the lower yields operating income in constant dollars for its European brands was up for the quarter. The Chinese yields improved significantly in the fourth quarter, as they did in the third quarter, driven by both price and occupancy and this resulted again from the decision to shift the sourcing strategy for Costa Asia.
The cruise costs available per lower berth day in current dollars was up 12.4% in the fourth quarter.
However, in constant dollars, cruise costs per lower berth day were up 8.4%. Fuel prices this year were higher than the fourth quarter last year and that cost the firm about $90 million extra dollars. Dry-dock timing that benefited the firm earlier in the year turned around in the fourth quarter as expected to the tune of $19 million. Therefore, excluding dry-dock and fuel, cots in constant dollars cruise cost per available lower berth day was up 3.4%. This was driven by some significant inflationary pressures in food, wages, crew, travel and other areas.
- During the fourth quarter of 2007, Carnival closed on Iberocruceros joint venture investing $402 million.
- The firm repurchased 5 million shares of stock at a cost of $220 million and increased its dividend by 5 cents per share or the equivalent of 20 cents per share on an annual basis. This brings the cumulative amount of share repurchases and dividend increases over the last three years to 36 million shares repurchased at a cost of $1.6 billion, and increases in annual dividends of $1 per share from 60 cents to $1.50 on an annual basis.
During the fourth quarter, the company took delivery of one new ship, the 90,000-ton Queen Victoria.
This marks the first time ever that Cunard has had three Queens in service. Last week, Cunard held a spectacular naming ceremony in Southampton, England to welcome Queen Victoria before setting off on her maiden voyage to Northern Europe. All three Queens will unite for the first and only time in a historic event to take place in New York Harbor on January 13, 2008.
In the fourth quarter, the company has ordered six new ships, five for its European brands and one for its North American brands.
The company placed orders for two 114,200-ton cruise ships for Costa Cruises to be delivered in 2011 and 2012, and two 71,000-ton cruise ships for its AIDA Cruises brand scheduled to enter service in 2011 and 2012. The company announced the construction of Queen Elizabeth, a 92,000-ton vessel for its Cunard brand to enter service in 2010. It also exercised the option for a 32,000-ton ship for The Yachts of Seabourn to enter service in 2011.
The company also recently announced a significant increase in its presence in Asia.
The firm has announced the sizing up of its China, Asia deployment for 2009, the Costa Classica which can carry up to 1,680 passengers, would be moved to the Asia market in the spring of 2009 to join the Costa Allegra, which has been in Asia for a couple of years now. The Classica will be moved in to the China market and the Allegra will be moved to Singapore and operate cruises throughout Southeast Asia. The management has been encouraged by the very positive response it is receiving from these new markets and believes that as it expands its footprint in Asia, it can establish itself as one of the leading vacation companies in this increasingly important part of the world.
Australia and New Zeeland has also become an increasingly important market for the company.
But to continue the strengthening of the Australia economy, the company has sized up the P&O Australian fleet through the addition of the Pacific Dawn in November of 2007, which formerly was the Regal Princess. This larger ship will replace the older and smaller Pacific Star, which has been sold into Europe and to a European tour operator. Also in November 2007, the Sun Princess was moved to year-round deployment in the Australia and Asian market, and the Australia New Zealand market. Both the Pacific Dawn and the Sun Princess had been well received and booking have been strong.
