Royal Caribbean Cruises Ltd. says that it expects to consume 1,345,000 metric tonnes of bunker fuel in 2014 and 338,000 metric tonnes during the second quarter.
In its fuel expense and guidance summary for 2014, Royal Caribbean provided its fuel cost calculations based on current at-the-pump prices, net of hedging impacts. Based on today's fuel prices the company has included $245 million and $957 million of fuel expense in its second quarter and full year 2014 guidance, respectively.
Forecasted consumption is 55% hedged via swaps for the remainder of 2014 and 51%, 30% and 10% hedged for 2015, 2016 and 2017, respectively. For the same four-year period, the average cost per metric tonne of the hedge portfolio is approximately $616, $642, $614 and $597, respectively.
Royal Caribbean provided the following fuel statistics for the second quarter and full year 2014:
Statistics | Second Quarter 2014 | Full Year 2014 |
Fuel Consumption (metric tonnes) | 338,000 | 1,345,000 |
Fuel Expenses | $245 million | $957 million |
Percent Hedged (fwd consumption) | 56% | 55% |
Impact of 10% change in fuel prices | $10.7 million | $32.2 million |
In its financial results for the first quarter of 2014, adjusted net income was $46.1 million, or $0.21 per share, versus adjusted net income of $78.2 million, or $0.35 per share, in 2013.
US GAAP net income, which reflects some restructuring and related charges, and the impact of the operations of the divested Pullmantur non-core businesses, was $26.5 million, or $0.12 per share versus $76.2 million, or $0.35 per share in 2013.
Net Yields were down 0.3% on a constant currency basis. Unplanned voyage disruptions within the quarter negatively impacted yields for the quarter by about 0.5%.
Net Cruise Costs (NCC) excluding fuel increased 1.3% on a constant currency basis.
Commenting on the results, the company said: "Overall, the year is developing along the course the company previously anticipated. First quarter results were at the lower end of the company's guidance due to some minor voyage disruptions but this impact is expected to be offset during the rest of the year. Full year adjusted earnings per share (Adjusted EPS) is expected to be in the range of $3.25 to $3.45, which raises the company's previous guidance by $0.05."
Richard D. Fain, chairman and chief executive officer, remarked: "It is gratifying to see 2014 developing methodically along such a positive trajectory. Our business strategy is proving itself nicely while strength in our global markets is more than compensating for a highly promotional Caribbean."
In its outlook for 2014, Royal Caribbean said: "The company has raised full year Adjusted EPS guidance slightly to a range of $3.25 to $3.45 from $3.20 to $3.40. Constant currency net revenue yields and net cruise costs excluding fuel are expected to be consistent with our previous guidance of up 2% to 3% and flat to slightly down, respectively.
"Booking volumes for the past three months have been up about 16% year-over-year, with bookings for the past 8 weeks up by more than 20%, stronger than typical post-Wave periods. For example, the company experienced a record booking week at the end of February which is an unusual time for so much activity. As a result, load factors and APDs are higher than same time last year. While the promotional environment in the Caribbean has contributed to the strong booking volumes, demand has also increased for other itineraries.
"Demand for European sailings from all key sourcing regions and for China sailings remained particularly strong throughout the period and double digit yield improvements are expected for both products.
"In the first quarter we continued to leverage our improving credit profile and a healthy bank market to further reduce our interest costs.
"NCC excluding fuel are expected to be flat to slightly down on a Constant-Currency basis and approximately flat on an as-reported basis. Taking into account current fuel pricing, interest rates, currency exchange rates and the factors detailed above, the company has raised its 2014 guidance for Adjusted EPS to a range of $3.25 to $3.45 per share."
Jason T. Liberty, chief financial officer, remarked: "Despite pressures in the Caribbean, the diversity provided by our global footprint is proving its value. This model has allowed us to take advantage of the strong demand for our European and Asian products, while successfully navigating pressures in the Caribbean."
Image: MS Independence of the Seas - a Freedom-class cruise ship operated by Royal Caribbean.