Carnival Corp. Reports $2 Billion Net Income for Full Year

Carnival Corporation & plc reported net income of $2 billion, or $2.47 diluted EPS, for the full year ended Nov. 30, 2010, compared to net income of $1.8 billion, or $2.24 diluted EPS, for the prior year. Revenues for the full year 2010 were $14.5 billion compared to $13.5 billion for the prior year.

For the fourth quarter ended Nov. 30, the company reported net income of $248 million, with earnings per share increasing almost 30 percent to $0.31 diluted EPS, on revenues of $3.5 billion. Net income for the fourth quarter of 2009 was $193 million, or $0.24 diluted EPS, on revenues of $3.3 billion. Earnings per share in the fourth quarter were just $0.01 below the company’s September guidance despite the recently announced voyage disruptions, which reduced earnings by $0.07 per share.

“All-in-all, 2010 was an encouraging year with improved business trends from a gradually recovering economy,” said Micky Arison, Carnival Corporation’s chairman and CEO. “We achieved an 11 percent increase in net income on 7 percent higher revenues. We recovered almost 3 points of revenue yield (constant dollars) from 2009’s levels, while improved processes and efficiencies led to a 3 percent reduction in unit costs excluding fuel.”

Carnival reported cash from operations increased 14 percent to reach $3.8 billion, more than enough to fund the company’s expansion program, which peaked this year at a capital investment of $3.6 billion. Carnival also reinstated the dividend early in 2010 at an initial rate of $0.10 per quarter.

On a constant dollar basis net revenue yields (net revenue per available lower berth day) increased 3.9 percent for the fourth quarter 2010, which was better than Carnival’s September guidance of up 2.5 to 3.5 percent. Gross revenue yields in current dollars increased 1.5 percent. Excluding fuel and voyage disruptions, net cruise costs per available lower berth day (ALBD) for the fourth quarter 2010 were down 1.1 percent on a constant dollar basis. Gross cruise costs per ALBD in current dollars increased 0.8 percent. Fuel prices increased more than 6 percent to $488 per metric ton for fourth quarter 2010 from $458 per metric ton in fourth quarter 2009 and were slightly higher than the September guidance of $479 per metric ton.

During the fourth quarter, Cunard Line’s 2,068-passenger Queen Elizabeth was delivered and was christened by Her Majesty Queen Elizabeth II in Southampton, England. This was the sixth ship delivery in 2010 furthering the company’s strategy to expand its global presence. P&O Cruises (Australia) on Dec. 21 held the inaugural celebration of Pacific Pearl, expanding its fleet to four ships. In addition, the company took advantage of what it called attractive shipyard prices to order three more vessels during the year, bringing the company’s order book to 10 ships to be delivered through 2014.

Since last September, according to Carnival, booking volumes continued to be strong and prices for those bookings are higher than last year. At this point in time, the company said cumulative advance bookings for 2011 are at higher prices with slightly lower occupancies versus last year. Based on these booking trends, Carnival is forecasting a 3 to 4 percent increase in constant dollar net revenue yields for the full year 2011.

“Booking trends have continued to improve for both our North American and European brands, particularly for our peak summer season,” Arison said. “We are optimistic these positive trends are an indicator of a strong wave season, our heaviest booking period which begins in early January. Given the recent cold weather and snow, particularly in the Northern U.S. and Europe, there is no better time to book a cruise vacation.”

Carnival expects net cruise costs per ALBD excluding fuel for the full year 2011 to be flat compared to the prior year on a constant dollar basis. Based on current spot prices for fuel, forecasted fuel costs for the full year are expected to increase $134 million compared to 2010, costing $0.17 per share. This is forecasted to be partially offset by favorable movements in currency exchange rates worth $0.04 per share. Taking all the above factors into consideration, the company forecasts full year 2011 earnings per share to be in the range of $2.90 to $3.10 fully diluted, compared to $2.47 for 2010.

“Based on the above guidance, we estimate our cash from operations will exceed $4 billion in 2011, while our capital investment commitments decrease to $2.6 billion,” Arison said. “We expect to generate significant free cash flow in 2011 and beyond, which should provide us ample opportunities to return additional cash to shareholders over time.”

Carnival’s first quarter constant dollar net revenue yields are expected to increase by approximately 2 percent compared to the prior year. The company expects improved net revenue yields as the year progresses. Net cruise costs per ALBD excluding fuel for the first quarter are expected to be up 3 to 4 percent compared to the prior year on a constant dollar basis due primarily to the $44 million gain from the sale of P&O Cruises’ Artemis in the first quarter of 2010.

Excluding the Artemis gain and fuel, net cruise costs per ALBD for the first quarter are expected to be flat to up 1 percent on a constant dollar basis. Forecasted fuel costs for the first quarter are expected to increase $25 million compared to the prior year, costing $0.03 per share.

Based on current fuel prices and currency exchange rates, Carnival expects fully diluted earnings for the first quarter 2011 to be in the range of $0.15 to $0.19 per share, down from $0.22 per share in 2010. The first quarter of 2010 included the favorable impact of $0.10 per share of unusual items.