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NCLH third quarter net income slips to $450.6 million as operating expenses rise

Details: Written by Kari Reinikainen Kari Reinikainen; Category: Top Headlines Top Headlines; Published: 08 November 2019 08 November 2019

Norwegian Cruise Line Holdings Ltd (NCLH), the world’s third largest cruise shipping group, has reported a slight fall in third quarter net and operating income despite an increase in revenues as operating expenses increased.

In the third quarter, net income fell to $450.6 million from $470.4 million year on, while operating income also fell, to $511.7 million from $550.3 million. Revenues increased to $1.91 billion from $1.86 billion.

Cruise operating expenses increased to $990.7 million from $928.9 million and other operating expenses to $411.4 million from $379.1 million, year on.

For the first nine months of the year, NCLH reported a rise in net income to $808.9 million from $800.2 million but operating income fell to $978.1 million from $1.00 billion. Revenues rose to $4.91 billion from $4.67 billion.

GAAP equaled earnings per share (EPS) of $2.09 in the third quarter compared to $2.11 in the prior year. “The Company generated Adjusted Net Income of $481.5 million or Adjusted EPS of $2.23 compared to $506.4 million or $2.27 in the prior year. These results include a $0.06 per share adverse impact from voyage cancellations, itinerary modifications and relief efforts related to Hurricane Dorian,” NCLH said in a statement.

“Revenue increased 3.0% to $1.9 billion on a decrease in Capacity Days of 1.8% compared to slightly less than $1.9 billion in 2018. This increase was primarily due to an increase in Net Yield driven by the repositioning of Norwegian Joy to North America, robust onboard spending along with strong growth in organic pricing across all core markets. Gross Yield increased 4.8%. Net Yield increased 3.9% on a Constant Currency basis and 3.3% on an as reported basis,” NCLH said.

Total cruise operating expense increased 6.7% in the third quarter of 2019 compared to 2018, primarily due to continuing effects from the redeployment of Norwegian Joy during the second quarter of 2019 and incremental direct costs related to air promotions. Gross Cruise Costs per Capacity Day increased 8.9%. Adjusted Net Cruise Cost Excluding Fuel per Capacity Day increased 11.0% on a Constant Currency basis and 10.2% on an as reported basis, the company stated.

Half a million gross tons of newbuildings enter service in three days

Details: Written by Kari Reinikainen Kari Reinikainen; Category: Top Headlines Top Headlines; Published: 31 October 2019 31 October 2019

The cruise industry has experienced a record week of deliveries of newbuildings as three large ships added almost half a million gross tons to the global cruise ship fleet in just three days.

MSC Cruises took delivery of the 181,541 gross ton MSC Grandiosa from Chantiers de l’Atlantique shipyard in France today.

Yesterday, Meyer Werft in Germany delivered the 169,245 gross ton Norwegian Encore to Norwegian Cruise Line. It is the third and final Brreakaway Plus class vessel of the operator.

On Tuesday, Carnival Cruise Line received the 133,868 gross ton Carnival Panorama from Fincantieri. The ship was ordered in 2015 for P&O Cruises Australia as their first new building, but was later transferred to Carnival Cruise Line within the carnival corporation & plc group.

The combined gross tonnage of the three ships amounts to 484,654.

Comment – Capex landscape changing as refits, technology gain focus

Details: Written by Kari Reinikainen Kari Reinikainen; Category: Top Headlines Top Headlines; Published: 31 October 2019 31 October 2019

The capital expenditure landscape of the cruise industry is changing as refits and technology investments are gathering pace, while billions are needed to cover existing new building orders.

This message has come from the Finnish technology group Wartsila and Royal Caribbean Cruises, Ltd (RCCL), the world’s second largest cruise shipping group.

Most cruise ship building yards have full orderbooks far into the future, which means long lead times for new orders. The existing orderbook may also satisfy the industry’s capacity needs for the time being.

As RCCL made clear in its third quarter result presentation, upgrades of existing ships will include adding more cabins and other sources of revenue. This trend, which also means at least a gentle decrease in space ratio, has been evident for a few years now.

Such investments,, plus ones in technology and e.g. destinations on land, may have a shorter depreciation profile than newbuildings, which means that the impact is felt on the bottom line sooner.

The industry’s capital expenditure may continue to rise even if not a single newbuiding contract was place for several years as growing needs of ship upgrades and technology will add to those of massive orderbooks for newbuildings.

EU launches Fincantieri-Chantiers merger investigation with deep concerns

Details: Written by Kari Reinikainen Kari Reinikainen; Category: Top Headlines Top Headlines; Published: 31 October 2019 31 October 2019

The European Commission said it has opened an in-depth investigation to assess the proposed acquisition of Chantiers de l'Atlantique in France by the Italian shipbuilder Fincantieri, under the EU Merger Regulation.

“The Commission has preliminarily concluded that it is unlikely that a timely and credible entry from other shipbuilders would counteract the possible negative effects of the transaction,” the European Commission said in a statement.

“The transaction may therefore significantly reduce competition in the market for cruise shipbuilding, which could lead to higher prices, less choice and reduced incentives to innovate. The Commission has also preliminarily concluded that large customers would not have sufficient buyer power to counteract any risk of price increases as a result of the transaction,” it said.

Commissioner Margrethe Vestager, responsible for competition policy, said in the statement: “Demand for cruise ships is booming globally. Chantiers de l'Atlantique and Fincantieri are two global leaders in this sector. This is why we will carefully assess whether the proposed transaction would negatively affect competition in the construction of cruise ships to the detriment of the millions of Europeans taking a cruise every year."

According to the agreement between Fincantieri and the French government, would acquire a 50% stake in Chantiers de l’Atlantique, which has a large shipyard in St Nazaire, from the French state, which also agreed to lend a 1% stake to Fincantieri to allow it to take effective control on condition the company makes commitments on jobs, governance and intellectual property, Reuters reports.

Hurricane effect shaves RCCL forecast in otherwise strong year

Details: Written by Kari Reinikainen Kari Reinikainen; Category: Top Headlines Top Headlines; Published: 30 October 2019 30 October 2019

Royal Caribbean Cruises Ltd (RCCL), the Miami based cruise shipping group, said its 2020 earnings per share (EPS) would be higher than forecast at the publication of the second quarter report save for a negative effect of Hurricane Dorian.

“The company expects full year adjusted EPS to be in the range of $9.50 to $9.55 per share. This range includes the negative impact of approximately $0.15 per share from Hurricane Dorian. Excluding this impact, we are increasing the midpoint of our guidance by $0.08 per share,” the company said in its third quarter interim report. It had forecast EPS in the range of $9.55 to $9.65 in the second quarter report.

The company expects a net yield increase of approximately 8.0% in constant currency and approximately 6.75% as reported. The company's booking strength has completely offset the negative yield impact related to Hurricane Dorian.

Net cruise costs excluding fuel per available passenger capacity day APCD are expected to be up approximately 11.0% in Constant-Currency and up approximately 10.5% as reported. “The increase in this updated guidance is driven by the reduction in capacity and relief efforts from the hurricane together with a further increase in technology and product development investments. These expenses are being offset by expected favorability from activities below the line,” RCCL said.

"2019 is shaping up to be another year of solid yield growth and record earnings despite some unusual headwinds," said Jason T. Liberty, executive vice president and CFO.

"As we enter 2020, we are particularly enthusiastic about the new ship deliveries, the development of new destinations, our fleet modernization and technology initiatives. These investments will help us deliver even greater vacations while generating higher yields and better returns," he said.