Royal Caribbean’s First-Quarter Profits Plummet 93 Percent from 2006

Royal Caribbean Cruises’ first quarter profit took a 93 percent dive over the same period of last year, which it blamed mostly on the extreme seasonality of recently acquired Pullmantur Cruises and continued Caribbean weakness.

RCCL announced net income of $8.8 million for the first quarter of 2007, down from $119.5 million a year ago, on earnings of $1.2 billion, up 9 percent from $1.1 billion in 2006.

During a conference call with investors, RCCL executives said that the acquisition of Pullmantur had caused significant change in the seasonality of the company’s earnings because Pullmantur’s business is highly seasonal with strong summer months and weak winter months.

“Pullmantur has a greater degree of seasonality than other Royal Caribbean brands,” said RCCL chief financial officer Brian Rice. “This provides a material negative impact on the first and second quarter, but a nice windfall in the third and fourth.”

Caribbean softness also was a factor, as RCCL said the demand was weaker than expected, pushing net yields down 4.2 percent for the quarter. “After a strong fall performance, close-in bookings in the first quarter required more aggressive price promotions that we experienced throughout the year,” said RCCL CEO Richard Fain.

Fuel costs were down 2.8 percent over last year, and Rice said that RCCL had hedged 45 percent of its fuel for the year. Analysts took the loss in stride, noting that long-term considerations are good for the industry.