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Royal Caribbean Cruises 1Q profit falls on higher expenses

Royal Caribbean Cruises 1Q profit falls on higher expenses

Royal Caribbean Cruises Ltd., the world's second-largest cruise line, said Tuesday its first-quarter profit sank 92 percent from the year-ago period, mainly because of higher cruise operating expenses and its acquisition of Spanish cruise and tour operator Pullmantur.
Net income sagged to $8.8 million (euro6.47 million), or 4 cents per share, for the three months ended March 31 versus $119.5 million (euro87.84 million), or 55 cents per share, in the prior year.
Analysts polled by Thomson Financial expected earnings of 6 cents per share.
The company said Pullmantur's business is highly seasonal with very strong summer months but very weak winter months. It also included a two-month lag in Pullmantur's results. The changes hurt its first-quarter earnings, with Royal Caribbean saying it will also affect second-quarter results.
Revenue for the quarter rose 6 percent to $1.22 billion (euro0.9 billion) from $1.15 billion (euro0.85 billion) in the previous year. Wall Street consensus estimates put sales at $1.18 billion (euro0.87 billion).
But total cruise operating expenses rose faster, climbing 15.2 percent to $841.3 million (euro618.38 million) from $730.1 million (euro536.64 million).
The company continued to lament a weak demand environment in the important Caribbean market _ a problem besetting the entire cruise industry and hurting net yields.
Success in Europe and Alaska have helped offset problems in the Caribbean. Royal Caribbean announced earlier this year its largest ever deployment in Europe with seven ships visiting in 2008.
"I think we are seeing _ frankly everyone in the industry is seeing _ the same type of phenomenon," Chairman and CEO Richard D. Fain told investors in a conference call. "These new markets are opening up really very quickly and I think everyone is taking advantage of it and there's limitations on how much new capacity we can add."
Excluding Pullmantur, first quarter net yields on a comparable basis decreased 4.2 percent _ below guidance of down 2 to 3 percent. Yields are a key profitability gauge that measure net income earned from passengers per day from cruise tickets and onboard sales.
"At the end of the day we're all going full and what we're doing is fighting for the customers that are willing to pay us most," said Brian Rice, the company's chief financial officer.
High fuel prices have been an obstacle for cruise operators, many of whom have sought alternatives such as more efficient lighting and hull paint to save on costs. Royal Caribbean said its cost guidance for fuel was based on a current "at the pump" price of $412 (euro302.83) per metric ton, representing a negative affect of 5 cents per share versus the company's previous guidance.
Despite the marked drop in first quarter profits and weak Caribbean market, Miami-based Royal Caribbean kept its full-year earnings outlook in line with Wall Street estimates. Royal Caribbean reaffirmed its full-year net income guidance of $3.05 (euro2.24) to $3.20 (euro2.35) per share _ assuming fuel prices stay at current levels. Analysts surveyed by Thomson Financial are looking for a full-year profit of $3.12 (euro2.29) per share.
Royal Caribbean also issued second-quarter profit guidance above analysts' forecasts. The cruise line sees second-quarter earnings between 59 cents and 63 cents per share, while analysts expect net income of 53 cents per share.
The company predicted its soft pricing in the Caribbean would continue into the spring, but the revenue picture for the rest of the year is more encouraging, with load factors and pricing ahead of the same time last year for the fourth quarter.
Its shares rose 41 cents to close at $41.98 on the New York Stock Exchange.
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AP Business Writer Adrian Sainz contributed to this report.


Updated : 2021-05-08 13:36 GMT+08:00